Hi All,
My wife and I have recently purchased a high-set house, with 3 bedrooms upstairs and 3 ‘bedrooms’ or ‘utility areas’ downstairs (PLUS 2nd kitchenette, 2nd bathroom, 2nd living area, downstairs). We are thinking about potentially renting our house out ‘room by room’ in the future.
I have a few questions and I thought someone might be able to help!?
1. Downstairs rooms are only 2.25 m high (not the 2.4m legal height). I have been told that this would prevent us from legally renting these rooms out. Is this true?
2. Share House classification?. I have been told by someone that once 5 people are living in the house it becomes a ‘share house’ and someone else told me it’s once you get to 6. We would probably prefer for the property to not be classified as a share house as I have heard the Council regulations can be quite strict.
3. We are considering beginning to rent rooms out downstairs, until we find another property to live in. Meaning we will be living upstairs. IF we are to do that, what kind of tax are we looking at paying on the rent from downstairs tenants and how do we go about declaring that?
4. Insurance? If we are living in the house at the same time as having 1 – 3 tenants downstairs, what kind of insurance do we need to have?
Thanks so much! Hope someone can help!
Ben
Hi benhiggins
I would suggest the RTA in your state to cover your bases.
As a general course of events in Qld you cannot accept rent if it does not conform to building standards.
That said I would beat it has been rented in the past!
BluegrassBen, sorry to rain on your parade but… if a room is not a habitable room as defined in the Building Code of Australia, then it cannot be used as a living space. The main requirements for habitable rooms are: ceiling height of 2400mm, adequate lighting (10% of floor area to be glazed/borrowed light), adequate ventilation (5% of floor area to be through and openable window).
Rooms which aren't habitable include kitchens, hallways, laundries, bathrooms, storerooms etc.
We live in Cairns and own a couple of sharehouses. One we live in upstairs and rent downstairs. The house is actually owned in the name of our family trust. We rent upstairs from the trust. This helps with tax issues. Downstairs we have five tenants. There is RTA form on their website for short term rental which we use for each tenant. We don’t collect bonds but could do so if we wanted. Our discussion with council is that up to and including 5 tenants is not a business, but above that number should be registered as a boarding house. The properties we own are either zoned commercial or Residential 3 (high density living). To be honest, our discussions with council and anecdotal evidence with researching other sharehouses in Cairns found that people do not really follow the classifications in Cairns. There are a dime a dozen sharehouses that are not legal height. Our properties are legal height because we don’t want to have issues with revaluation. Also you may have difficulty with insurance. Even with a legal height property insurance is difficult and expensive. The normal mainstream insurers would not take our business. We found an underwriter called QBE that was willing to insure us with five tenants downstairs but it is pretty expensive , about $1500 annual.
Have a talk with council. My latest discussion with a builder said it was the ventilation and light to the downstairs that was more important, not strictly the height. At 2.25m you are pretty close and if it is well lit and ventilated you may get council to approve it. Make sure you keep your paperwork if you ever get revalued though!The rooms are really well ventilated and lit (big windows) and join on to a major living area. Thanks for your advice. I will be speaking with council in the near future – thanks! It’s kind of annoying that it isn’t QUITE legal height, because you really can’t tell that it’s not.
How do you go about setting up a family trust?
and what is the best way to go about getting council approval?Ben
Ryzac,
One other question?
What does your QBE insurance cover exactly?
Hi Nathan
RTA = Residential Tenancy Authority.
Ben this might help http://www.qbe.com.au/Personal/Landlords/Insurance.html straight from the horses mouth.
Richard Taylor | Australia's leading private lender
1. Family Trusts can be easily set up by your accountant. It is a good vehicle to hold property in as it separates you from your investment portfolio. Also you can distribute profits to the beneficiaries (you and your family members) and reduce overall tax payable. We use a corporate trustee. I am director of the company as this is needed for me to get loans for the trust. The disadvantage is that any losses are trapped in the trust and can’t be written off against your personal income – this can be a real bummer if you are running negative.
2. Go have a chat to your council about getting approval for the downstairs. Probably a good idea to have a written description/photos available to present to them so they can justify sending someone out to have a look and do the measurements.
3. The QBE insurance covers house and contents. Does not cover our tenants contents. Also has liability/indeminity.
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