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The rise of home and income properties, and how to get it right

As Kiwis continue to tighten their belts and shorten their purse strings, many of us are looking for new ways to make some extra cash. While most don’t have the time or resources to take on a second job or start a side-hustle, some are turning to the idea of home and income properties to help cover the shortfall.

The term ‘home and income’ refers to any primary residence with additional opportunities to generate income as either a full-time rental, or an occasional Airbnb listing.In the eyes of the council authorities, this consists of liveable spaces with a separate entrance and independent amenities from the main house.

Bayleys Property Management Director Will Alexander says money is the biggest motivator for home and income properties.

“Greater return on investment, and better yield. That fundamentally is it. As much as I'd like to say, people were trying to create more housing and accommodation for others, the reality is, it's just more money.”

But if it’s not money, Alexander says another big driver is our aging population and family commitments.

“There’s different cultures that come to New Zealand with greater diversity. Chinese culture, for example, often has grandparents staying on the property to look after the kids.”

Instead of extra accommodation being an afterthought, many are now including an extra studio unit or minor dwelling on their wish list while searching for home to buy or rent.

“Any property that we are renting that has a sleepout, or a self contained studio is definitely attractive to people. We find that we get a lot more interest when they’re available.”


There’s a few options when it comes to home and income properties.

Minor dwellings:

A minor dwelling is generally over 65 square metres in size, and has utilities separately metered.

“So that's a key thing, water, power and gas that are all separately metered from the other dwelling. It also has its own kitchen, and bathroom.”

Alexander says for a minor dwelling you stand to make around the same per week as what you would for a one bedroom home.

“Probably up to around $400 per week for a good, legal and consented one bedroom minor dwelling.”


A sleepout is generally less than 65 square metres in size, and doesn’t have the same facilities.

“It's basically a room or a livable space that meets the Healthy Home standards.”

“For a liveable area you could get an extra $100 to $150 dollars per week, but you can’t separately rent out a sleepout, it has to form part of the overall tenancy.”

This means that you can have a tenancy with five people and five different names on the tenancy, but you can't have the four bedrooms as one tenancy and the sleep out as one tenancy.

Private downstairs dwelling:

If you find an existing property with a basement or downstairs flat, this could be an opportunity for a second dwelling. With some renovations and upgrades, a downstairs space can become a viable way to generate income. However, these spaces do tend to get less sun and are often less accessible. Private annex: Particularly for smaller sections or people wanting to live close to family, a home with an independent annex is ideal. These house plans consist of a primary residential home with an adjoining self-contained wing separated by a wall or garage.


Apart from earning you more money per week, Alexander says a home and income property can also assist you with securing finance.

“You could have a property professionally appraised to confirm how much you’re likely to get from a sleepout or minor dwelling. The banks will look at that, and if it's all above board then absolutely, that will be far more attractive to them.”

“It's just simple cash flow and simple yield calculation. If you can get $75,000 a year instead of $60,000 then the banks will definitely look at it more closely.”

On top of a steady income, secondary accommodation also offers flexibility and convenience. One month you may rent it to holidaymakers or seasonal workers, the next offer it as a place for your own guests to come and stay, or use it as a home office.

It’s also much easier to resolve problems as they arise when you don’t have to travel to another property. Whether it be a tenant requesting a repair, a one-night visitor with questions, or an elderly parent in need of extra care – minimal travel time is required.


Smaller accommodation on home and income properties appeal to a lot of people.

“There’s some really good examples of regions where demand is high, places like Queenstown where it’s incredibly difficult to find long term combination accommodation.”

“I live in Hawkes Bay, and you do see it from time to time, and it’s becoming way more common where people put in a sleep out or self contained sleep out.”

Alexander says there’s a huge appeal to people on a budget, and people who live a lot more simply.

“So they're not necessarily looking for somewhere where there’s cooking facilities, it’s very basic.”

Tourists, seasonal workers and students often find smaller accommodation the most cost effective option.


While there are lots of benefits to a home and income property, there’s also a lot of things to be aware of when renting out the space.

“You have to be very careful under the Residential Tenancies Act. You can’t conduct a commercial undertaking from a residential property.”

“You can work from home if you live there, but you can’t have a business with clients coming onto the property.”

Alexander says there’s a couple of other scenarios that can also trip people up.

“Letting someone sleep in a property or area that doesn't meet the Healthy Home standards or the Residential Tenancies Act is a big no-no. So not having smoke alarms or insulation.”

“The other thing is, is it a safe property and a consented area? Does it have a code of compliance?”

Alexander says there are situations where people think they’ve been living in a consented dwelling when it turns out it’s not.

“In that circumstance all the rent paid during that tenancy has to be refunded if it’s challenged in court. There are several cases where precedent has been set.”

“It’s really important that you dot your Is and cross your Ts.”

People looking at purchasing a home and income property are encouraged to do their due diligence before buying.

“It’s often a really confusing area for people, and we get a lot of questions from sales agents trying to push for a sale, but don’t really know what they’re selling.”

“The best thing people can do as part of their due diligence is look at the LIM thoroughly. If there’s extra living spaces, are they on the LIM and do they have code of compliance?”

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