Does a Sleep-out Add value?

Posted on 06 JUN

Q: Hi Steve and Lisa. We have bought a  property in South Auckland as an investment and have noticed a few of properties in our area have sleep-outs in their backyards. This seems to us to be a great way of adding rental income to our investment. Is it worthwhile, does it add capital value, and how do we go about it?

A: A minor dwelling (or sleep-out) is a second unit built on the same title, detached from the primary residence. It has its own bedrooms, bathroom,  kitchen, separate water and electricity meter.

The average size of a minor dwelling is 60-65sqm,  and varies depending on the zone you’re living in.  Adding a sleep-out to your home property can be a cost-effective way to provide a home for elderly relatives or older children struggling with rising rent. It can also be a great way for investors to generate extra cash flow through rental income and increase the property’s overall value.

With rental yields of anywhere between $200 and $600 a week, sleep-outs can be a great strategy if you’re looking for a long-term return on investment. Not only that, but a sleep-out can make your property a far more attractive option and stand out from the competition when it comes to selling.

In terms of how to go about it, the first stop is your council. If you are adding a building of more than 10m2 then you will need building consent (and 10m2 is too small for a sleep-out!)  Regulations regarding what size your minor dwelling can be will vary from council to council so be sure to check before you buy. Once you know what you can fit on your land then Google  “minor dwellings NZ” and you will see that there are plenty of options. By law, sleep-outs must comply with both the Building Code of  New Zealand and any relevant NZ standards, so go to a reputable company to ensure you will be fully compliant. Useful information can be found at www.building.govt.nz as well as on your local regional or city council website.

Just one word of warning though: A sleep-out that isn’t in keeping with the design of the existing property or encroaches too much on the garden may actually end up devaluing the property, so use common sense and install something that fits your property.