Five ways to use your home to beat the recession

There’s no escaping the fact the economy is contracting – by 0.3 per cent in the March quarter and it’s more than likely the June quarter will be worse.

But that doesn’t mean you need to be in the poorhouse. In fact, there are lots of ways you can use your castle as a side hustle.

1. Make the most of your asset

Recessions can provide opportunities for people with savings or who are still earning a good income. One of these is to renovate or reconfigure your home to create value.

“The cost of labour can drop as unemployment rises, making it cheaper to hire builders. So downturns can be a good time to invest in your home to make it more liveable and enhance its value,” says AMP financial adviser Mark Borg.

2. Rent out spare rooms or unused space

Think about renting out your spare room, granny flat or unused space like a garage, which can be especially attractive to a potential tenant if you’re close to a business or industrial district.

“But think through any potential impact on your home’s tax-free capital gains status,” says Borg.

If you do rent out rooms or other space, you’re also likely to need to do some minor upgrades to comply with fire and safety regulations, adds Small Is The New Big property developer Ian Ugarte.

You will also need to tell your insurance company what you’re doing and potentially change your policy’s terms to rent out space within your home. The risk if you don’t do this is you’ll be uninsured. So if the tenant’s candle burns the house down, you could be without cover.

You can earn around $200 per week per room if you rent one out, minus the added utilities costs of the people living with you.

If your property is sizeable, you could also think about renting out part of your property for events such as weddings. Another option may be to rent your granny flat to a hairdresser or beautician or similar. That way you still have your property to yourself and privacy at night, but it’s earning a little extra in the day.

Again, check with your insurer and the council and make sure you have the right policy and approvals in place.

3. Live somewhere cheaper and rent out your home

This can be a good one if times are tough and you can’t afford the mortgage but renting out your house will cover it. The idea is to move to a property where the rent is less than the cost of your mortgage repayments.

“This could be a better option than selling in a difficult market,” says Borg.

But it can also open you up to additional risks.

“You might have to pay capital gains tax when you sell. You also risk exposing yourself to a rogue tenant who may cause damage to your home. Time between tenants can also leave you vulnerable to needing to pay rent to your landlord, as well as make mortgage repayments without the help of the rent paid by your tenant,” he warns.

4. Use lower interest rates to get ahead on your mortgage

With interest rates at all-time lows, now’s the time to get ahead of your loan faster by making additional repayments.

“This could take years off the life of your mortgage,” says RSM Australia principal Robert Zammit.

5. Go hunting for a bargain

At the moment, some property owners are trying to free up cash and want a quick sale. This is an opportunity to negotiate on price and pick up a quality investment property under the market price.

“Investors can use this strategy to build their portfolio. But choose areas wisely and bid with your head so your investment delivers long-term returns,” says Kavitha Vipulananda, principal of property development firm Alleura.

Whatever your decision, don’t take it lightly, says Borg.

“Owning any sizeable asset including your home during a recession requires a level head. It’s important not to make any large decisions based on emotion, or without fully considering the long-term implications of any changes you are thinking of making.”