How to make thousands of dollars from your spare room
Buying a home is likely to be the biggest investment you'll ever make so why not try to make some extra money from it, especially if cash is tight. Maybe work is scarce thanks to the fallout from COVID-19 lockdowns. If you have a spare room use your spare time to turn it into a cash cow.
This usually involves sharing your home with other people but not always. You could rent out the space in the room as storage on P2P storage sites like Spacer. You list your space, set the rules including a timeframe and price, and people will hire it to store their possessions. Spacer provides some rough guides on pricing - a spare bedroom could make about $150-$200 per month and an average shed about $100-$150 per month.
It is free to list your space on Spacer and you can rent out a range of 'spaces' from your spare room to your empty driveway. Spacer collects a fee from the renter for each transaction. Payments are made in the first week of every month into your nominated Australian banking account.
If sharing your home is not a problem, you're likely to make more renting out your spare room as short-term accommodation, especially if it has an ensuite bathroom attached.
For example, you could become an Airbnb host, essentially offering travellers an alternative to a hotel room stay. Rates vary widely depending on location and facilities but, for example, at the time of writing a private room with shared bathroom in the Newcastle suburb of Waratah was available for $81 a night. This has the potential to make the host a tidy sum of $12,636 gross renting it out three nights a week, 52 weeks a year. Airbnb charges a host service fee, generally 3%, but this can be higher depending on location and other factors. If you're going to have guests regularly staying in your property you may need to liaise with your body corporate or neighbours.
If you would prefer to have a regular house guest, you could rent out your spare room permanently. This will not bring as high a rate as casual visitors, but it does give you certainty over how much you will earn. A spare room with a shared bathroom in the Newcastle suburb of Waratah could bring you about $210 according to listings on flatmates.com.au, one of several websites where you can list your spare room. Over a year this would add up to $10,920.
Of course, financial considerations are not the only ones when it comes to having someone living in your home fulltime. You'll likely need to consider what type of person you would like to share your home with and the lifestyle they lead - for example are they a shift worker? - and how this will fit in with your lifestyle. Factors such as their cleanliness, the division of responsibilities, utility bills and facilities and how you will resolve conflicts are important to consider and agree on upfront.
The flatmates.com.au site lets you list your spare room for free, but you can upgrade your listing for a fee. Another popular site is flatmatefinders.com.au. It charges a fee to list, depending on how long the listing is up, for example, the fee for a one-month listing is $27.99.
If you don't just have a spare room but a spare building such as a granny flat, you can score the best of both worlds - a regular income without sharing your personal space. The amount of money you can earn varies markedly, depending on location and facilities. For example, a one-bedroom, one-bathroom with lounge, kitchenette and laundry facilities in the Newcastle suburb of Waratah West was listed for $350 a week at the time of writing, giving an annual gross income of $18,200.
Of course, earning money from your home does have tax implications. You need to declare any income you earn, but you'll also have legitimate deductions depending on how you lease out your space, so it's probably worthwhile consulting an expert to help with this. The family home is also usually free of any capital gains tax implications when you sell but not if you have used part of it to earn income. The amount of CGT you'll be up for when you sell for is normally calculated by taking into the account the portion of your home that was leased out and the amount of time it was leased out.
The 2020-21 federal government budget announced a CGT exemption for granny flats that are occupied as a family arrangement - where there's a formal agreement in place defining the responsibilities of both landlord and tenant - to support an ageing or disabled relative, or "people with other personal ties", and is expected to start in July, 2021.