Should you include a studio apartment in your next home renovation?

There’s no doubt that working from home, hunched over your laptop on the couch and keeping a straight face in Zoom meetings while the kids terrorise one another, hasn’t been ideal.

Many of us have been longing for some extra space during the COVID-19 lockdowns. With government initiatives such as the HomeBuilder scheme, introduced during the height of the pandemic, it’s no surprise that more Australians looked at upgrading their homes.

Creating a separate flexible studio space where you can work, rest and play has been high on the to-do lists of many home renovators. Perhaps you have a growing family with teenagers craving a retreat, elderly parents who you’d like closer to home, or adult children who have returned to the family nest.

But before you forge ahead, it’s important to factor in some key considerations; primarily, who is going to be using the space and how?

“You need to be really clear on what you want to achieve,” property investment adviser and managing director of Property Planning Australia, David Johnston says.

“Is it to improve your current lifestyle? Is it to provide an extra space? Is it for ageing parents or ageing children? Or is it to potentially lease out and earn some extra income?

“It might sound simple, but often people aren’t clear on their goals, and they can rush in, particularly when it comes to thinking they’re going to make money.”

Given many of us spent the bulk of the year working from home, and are likely to continue to spend a few days a week in our makeshift home offices, Johnston says having an additional flexible space is beneficial for home owners and prospective buyers down the track.

“Having that really nice space that is a study/rumpus room, in the right market, can be a positive.

“People are going to be looking for that really separate space to be able to work from. It’s going to be required by a lot more home buyers than previously,” he says.

“If you’ve still got the land size – and it doesn’t negatively impact [on] the yard, the aesthetic – I think that can be positive, and that’s something that we’re looking to do.”

Johnston is midway through a renovation of his own home and is looking to convert an old single garage at the rear of the property into a studio space/pool house.

“The primary driver is a study that is separate from the house that can double as a play space for the kids and a guest house,” he says.

Joseph Cade, director of Garden Studios, says business has doubled this year due to the coronavirus pandemic, with many buyers using the customisable constructions as an additional recreational space.

“Most of the studios are used as extra space for children, as home offices, or to escape the husbands,” Cade says, adding he has plenty of clients who rent out the fully-kitted studios.

He adds: “Many people consider these an extension of the home, so people expect a high level of finish and customisation.”

Construction of the pre-fab studios can take from four to 10 weeks, depending on the size and style.

Chris Hunger and Paul Dugdale from Gentrify Builders in Geelong recently completed a studio apartment at the rear of a small, narrow block in the trendy suburb of Carlton North. Now primarily used as an Airbnb, Hunger says “it needed the full function of a house”.

The split-level studio is equipped with a stylish and functional kitchen, (including cooktop and dishwasher), a separate bedroom with full en suite, ample storage and there’s enough space to utilise as a home office. High ceilings, natural timbers and a light palette help to make the space feel larger than it is.

Hunger says the key to creating a sanctuary away from the main house is to create efficient and flexible spaces. Dugdale adds: “There are lots of benefits as long as you design them well and build them well. Attention to detail is paramount as it’s such a small space.”

If you’re looking to add a studio apartment for financial gain, Johnston advises that you do the sums on whether the rental return will cover the mortgage costs plus interest, and how long it will take. “It’s often 10-plus years,” he says.

“If you do decide to rent it out, then you’re going to have a capital gains tax implication on your family home which you wouldn’t otherwise – you have to think that through. Do you want to do something that means you’re going to have to pay capital gains tax when you sell your home?

“I think the granny flat-type studio apartment, to actually rent it out, it’s high risk and has lower prospects of a positive return, whereas improving the lifestyle amenity of the home itself – by adding a studio apartment, a study, a separate space – that is more likely to get a return, for lifestyle purposes.”