Property owners with unoccupied extensions to rent in the family home have a ready-made source of additional income. With the right tenant, and sound advice from both a tax professional and a property management agency, the additional income could be earmarked for a specific purpose. http://www.watsonproperty.co.nz

1. Householders with Extensions to Rent Create Second Income
As the cost of home ownership continues to rise and mortgage stress sees owners looking
for alternative ways of topping up their mortgage payments, the idea of bringing a tenant
into the family property is being re-examined and given new life. While many people,
especially students in shared accommodation, take in a boarder to occupy a single room and
share expenses, there is a broader application of this strategy which could help out people
who have an unoccupied extension to their current dwelling. Many properties have self-
contained extensions to rent at ground level, or suitable space built-in under a high-set
property to create a separate self-contained living area.
If this part of the dwelling is unoccupied, it is a wasted resource that could be earning
additional income to offset part of the mortgage, or be put towards refurbishing expenses.
With the competition for rental space heating up, a look at the real estate Manawatu
market should assist an owner with extensions to rent to decide if there is a rental demand
for this type of living accommodation.
Of course, sharing private living space with a total stranger is not just all about making
some extra income. There will be some loss of privacy, and careful thought should be put
into how that will be managed, and whether the owner will be able to keep the welcome
mat out if the tenant steps out of line. The tenant should also have some rights, and these
issues need to be negotiated prior to someone moving in and occupying the extensions to
rent.
As with most methods of creating income, a tax liability is usually also created. The general
rule is that any income earned from a rental premises will be liable for income tax, and
must be included in an income tax return. This isn’t all bad news, as any expenses incurred
in the process can be deducted off the income.
When the space being rented is a part of the family property Manawatu, a calculation of
the overall floor space of the entire dwelling must be done, followed by a similar calculation
of the extensions to rent space. This is to determine what percentage of the total dwelling is
occupied by the extension and enables the owner or their tax agent to calculate the portion
of expenses that is attached to the extension, so it can be deducted off the rental income.
This is an excellent strategy to create a separate income stream in a relatively short time
frame. However, before any decisions are made, it would be prudent to contact a taxation
specialist, as the laws are complex and any misinterpretation at the outset could be
expensive further down the track.
http://www.watsonproperty.co.nz