Turning your home into an investment property while you live there usually means either letting your spare bedroom out or creating a self-contained unit. Self-contained units are most often basement flats or granny flats – tiny houses in the backyard. Often these are present on the property when you buy it or are built for family who, for whatever reason, move on.

The amount of hassle it will be to specifically build a unit on your property – whether it’s separate or not – depends on where you live, and what amenities the unit has. In Auckland, for example, once a unit has a kitchen it’s considered a second dwelling (even if it’s in your basement) and you have to meet all the requirements for second dwellings – including space and privacy. Other councils have different rules.

The cost of conversion plus council consents need to be factored into whether it’s worth putting a second dwelling onto your house.

If you already have a granny flat on your property and you want to rent it out, you’ll have to meet all your obligations as a landlord, including health, safety, and building regulations.

The other instance where you can turn your home into an investment property is if you move into a new place but retain ownership of your original home and rent it out.

It’s important that you do this for the right reason – your home will get a good yield as an investment property. There are emotional reasons for holding onto a house, especially if it has been your home for a long time, which can cloud your judgement – it can be very hard to say goodbye to a place. (Though if you’re thinking like that, how will you feel watching tenants not treat the place as well as you’d have?)

If you genuinely think you will get a good yield – your house is in a desirable area, has two or three bedrooms, and has continuing capital gains potential – then it’s important to make sure you have the right tax and loan structure in place to let you get the most out of having a rental property.