A house and income sounds like it has a lot going for it. You can rent out a flat that's on your property and the income from the tenant can considerably reduce your mortgage payments. If you are mortgage-free, it supplements your income.

The income may come from a downstairs flat, a semi-detached flat, a house divided in half, a separate cottage or dwelling on the same site as your house.

There are a variety of legal requirements and "should haves". These include a separate power meter, water and hot water, sound proofing, fire proofing, a separate address, even a separate title.

Rachel Stace is a TV producer who has owned several "home and income" properties, her first being a Herne Bay villa. She says it just happened to have a flat downstairs — so she accidentally fell into "homes and incomes".


Her next home, a Grey Lynn villa, also had a downstairs flat. And she has since rented out other similar properties. Working for many years as a freelancer, she has found the income from the downstairs flats to be a lifesaver.

The key has been choosing good tenants, she says — people she got on with. The Grey Lynn tenant was a piano teacher who had a band that practised underneath her top deck. Rachel enjoyed the music.

She and the musical tenant became firm friends and went to each other's parties. There were no issues about sharing the back garden and pool.

Life with the downstairs tenant in Rachel's first property hardly went swimmingly. Noise transferred easily from one storey to another. If there was some noise from Rachel's children upstairs, the tenant banged on the ceiling with a broomstick. Rachel also heard a variety of noises from downstairs, including the couple's arguments.

There followed an exchange of letters and she was relieved when they left. She had a false ceiling installed in the next home, which insulated the sound.

Rachel says with one property, the council told her it would provide a code of compliance, but then sent her a letter saying the property did not comply. After a discussion with the inspector, she says he granted compliance. When she came to sell the property, she told the buyer that "this letter from the council is worth $50,000".

Ideally, she says, the home and income needs a separate front door, separate power and water meter, and ideally a separate parking space. Rachel says you should do your due diligence, when looking for this kind of house, to see how practical the flat is to rent out.

Another property she let out had a top and bottom flat, but the previous owner had not bothered to install a separate water meter.

"The upstairs was a [council approved] brothel which used lots of water," she says. "The downstairs tenants had been there for years. So although (there were) no separate water meters, we had a pretty good idea how to split the monthly bill. But when it came to the crunch, the upstairs tenants claimed they didn't speak English, and didn't understand this [arrangement] when they moved in.

"The Tenancy Tribunal said I had to pay the $600 water bill because I couldn't prove they had used the water. I put in a separate water meter after that."

The Herald asked the Auckland Council consents team for key points regarding home and income properties. The team says:

• There are many so-called granny flats around, many of which have a sink and cooking facilities, originally built for a family member.
A problem arises, if you want to let the flat out, in that the area is out of your control, if a non-family member is living there. So the flat becomes a fire risk, from say, cooking or smoking. For this reason you will need to apply for a building consent for a separate dwelling, unless it already has one, or has a building permit if it is under previous legislation. To get the consent, you will need to install fireproof materials. Any shared entrance also needs to be fire-resistant.
• Under today's law, although there is no such legal entity as a granny flat, it is likely you can install a sink and a microwave downstairs, say for a rumpus room, or to provide hot drinks and a bathroom for a family member who has a downstairs bedroom.
• If you want to rent out an area in a house you are buying, it's advisable to check that it is a separate dwelling (maximum 60sq m). You can do this by inspecting the council file on the property.