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How To Use Your Home Equity To Add An Office?

Home Equity

For millions of employees the world over, they’ve just learned their spare bedroom is likely to be their work office for the foreseeable future. While the majority of employees are in favour of the new work-from-home opportunity, most do not have a place within their home they feel offers adequate privacy and is ideally suited to productivity.

People working from home have shown fantastic creativity when coming up with a space to work—from the kitchen table to the garage, workspaces are springing up all over and are now the norm in most households. Savvy real estate agents are quick to highlight additional bedrooms and open areas as home-office ready, buyers and sellers alike are profiting.

A custom office

For homeowners that intend to stay in their home and are working from home indefinitely—either part or full time—renovation is one way to add value and create a custom workspace to meet specific needs.

Before remodelling, homeowners should speak with a real estate agent to learn about home offices typically found in the area. As much as anyone wants a space to call their own, when it comes time to sell, this room shouldn’t be so distinct, it stands in the way of offers.

Renovating can mean adding a room or modifying an existing space. The location and extent of the renovation should take into consideration the critical needs of the user. Start by listing must-haves such as built-in bookcases, fold-away desks, storage space, equipment surfaces, internet, and electrical wiring, seating, lighting, soundproofing, and anything else necessary for your optimized work environment.

If modifying the home’s structure is in the plan, it’s best to hire an architect. Depending upon the state, it may be required to obtain building permits. It’s also better to add a room rather than change a portion. It’s much easier to maintain a professional atmosphere when the entire room is used only for work. Cordoning off an area of the kids’ playroom means relegating the kids to another room during video conferencing calls.

A tiny home office

Tiny houses are very popular with people concerned about carbon footprint. These micro-homes typically range in size from 100 to 400 square feet, making them the perfect size for use as a home office. Tiny homes come in kits or as a custom build. In either case, they extend the square footage of the main house and increase its value.

When considering the addition of a tiny home as an office, check with local authorities for regulations regarding size and amenities such as electricity, on-suite toilets, and kitchens.

Some tiny homes begin as sheds available from big-box home-improvement stores. With reinforced framing, insulation, and plumbing, these prefab constructs make it a DIY project for someone good with a hammer.

Adding value

Whether creating a home office through renovation or addition, home-equity loans can provide the funds needed to cover the expense of designing and building. The additional square footage not only adds value to your house, but the ongoing use may also be tax-deductible.

Employees working from home have three methods for calculating home office expenses:

  • COVID-19 rate of 80 cents per hour—available from 1 March 2020 to 30 September 2020;
  • Standard, non-COVID-19 rate of 52 cents per hour; or
  • Actual costs.

The ATO intended the new COVID-19 hourly rate would make claiming the expenses associated with working from home more manageable for taxpayers. An online calculator will help estimate claims.

According to H&R Block Australia, in addition to these tax deductions, home workers can also deduct:

  • Heating, cooling, and lighting bills
  • Depreciation of home office furniture and fittings
  • Depreciation of office equipment and computers
  • Computers, laptops, tablets, printers
  • Mobile phones
  • Low-cost capital items such as furniture and computer equipment costing less than $300
  • Other items such as computer consumables (e.g., printer ink), stationery
  • Telephone and internet costs
  • Cleaning costs

Summing it up

Many people working from home are making do with a temporary office in a spare room, at the kitchen table, or in the garage. Using home-equity loans, homeowners can borrow money to finance the design and build of an office customized to their exact requirements either by renovating an area within the house or adding a room.

Tiny home kits and custom builds offer a way to separate the workspace from the primary home, which affords privacy to both family members and the at-home worker. Additionally, for professions requiring client meeting space, tiny homes offer solitude and privacy.

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