Do you have extra rooms in your house? What are you doing on it? Do you put some things in it or you just leave it bare?
There are many advantages of having an extra room in the house. You can turn it into a guest room; you can have a space for emergency purposes, and temporary storage of your things. The extra room can be considered an asset if you can use it for a purpose. However, if the room is left bare and without a purpose, you have to start thinking what to do with it.
If you are still planning to build your house and is considering an extra room, it is highly recommended that you assess first the would be expenses. Not because you have a large property means, you will build a house without careful planning. In this day and age, we should always be wise in decisions. Money is not earned that easy so let us make sure we make the most out of our earnings.
To magnify that you need to use that bare extra room in the house, I will explain in this post how much you spend on every space in your property even if you are not using it.
Know the Size of your Property
First is to determine the total size of your property. For the purpose of sampling and calculations, let’s use a property with 150 square meter lot. 70% of your lot is being covered by your house while the 30% serve as the garden and the garage. 70% means 105 square meters. From the 105 square meters you can now divide it according to the size of the rooms in the house. Let’s just say that your extra room covers 15 square meters.
Determine the Cost per Square Meter
Asses how much is the current cost of your property. Again, the cost should be the current cost and not the acquisition cost. Note that houses and lots are one of the properties that do not depreciate its value. Year by year, the cost goes up. The cost of the property depends on what state you are in.
In NY, a property is within the range of $500,000 but you can get a lower property cost in other states. Let us say you have a $500,000 property. That translates to around $3,300 per square meter. If your extra room covers 15 square meters, then the cost of the space is $49,500 per year or $4,125 per month.
Tax due depends on the state you live in and the market value computed by the assessor. But for the sake of computation, let us say your property has an assessment rate of 10% of $500,000; this translates to $50,000. Tax is usually 25% of the assessed value, which is equivalent to $12.500.
Coming from this, the tax your extra room is covering is $1,250 per year or $105 per month.
Your extra room even if bare uses electricity when lighted. Let us just say you are using CFL then you are spending $4 per month for that. Cooling may also be needed to avoid spread of bacteria and dirt. On a monthly basis, an average of $50 is spent in AC systems. Of course, you need to clean the room. Cleaning agents allocated can be as much as $50 per month.
What to Do to Maximize the Cost
Adding all the above will give you $4,334 or roughly $5,000 per month or $60,000 per year. Imagine that, allocating such amount without something in return? What a waste! That is why it’s important that you make it as an asset more than just a property. You cannot do anything to minimize the cost. Instead, maximize the use of the room so it will compensate the monthly expenses.
There are ways on how to make it income generating. You can put up an online store and make it your stock room. You can also make it as your office and start a work at home job there. The most common others do is to have offer it for rent. If the extra room is detached from the house, you can turn it into a store. Think of anything that will make it an income generating space.
If you cannot make it income-generating, make it sure you use it for something and not just leave it bare. You can turn it into a media room, music room, playroom, home theater, or study room. If the extra room is near the living room, you can turn it into a social area where you entertain your guests.
Spending $5,000 per month is no joke. You could have allocated that amount to other things that are more important. Instead of regretting having an extra room, think otherwise and start making bright ideas to maximize the room.
The Alternate view about an extra room
To the contrary to above, an extra room can be used up in various ways for monetary gain. Let’s look at some of them
1. An extra room increases home equity and hence, the resale value
2. Extra room can be rented out which can cover a portion of your mortgage.
3. An extra room can be used up for hobbies, I have a friend who converted their extra room in to movie theater.
4. An extra room can be used for home-based business
Readers, do you have an extra room? Is it a money earner or a money waster?
We rent out one of our extra rooms to my sister. It’s an easy $325.
I wish we had an extra room! I could use an extra closet even, in our 500 sq ft condo 🙂 We had hoped to get a two bedroom in order to rent out the room for extra $$, but it didn’t work out this time. That’d be the main reason for us to have an extra room.
I am renting the extra space too, it is easy extra money if you don’t mind having other people in your house.
Lerma of US Visas Migration Expert says
I am also planning to use the extra room for rent it to other individual so that we can earn added income from it.
Scotty Crider - Less Job More Income says
My wife and I have been discussing the possibility of adding some extra space to our house for this purpose but it really puts it in perspective when you break down all the costs like that.