Create a 5th bedroom or stay with 4?

[Thomas Van Holder]

Hello Bigger Pockets community,

This is my very first post on the platform. I'm active in the Amsterdam market, Netherlands. After binge-listening for a couple of months to BP, I've decided to go for massive action and purchase my first investment property. 2 weeks ago an offer a house was accepted, which made me of course ecstatic!

About the house: Located in Amsterdam,  4-bedroom house, 1,5 bath, 100m2 (1100 sq feet), good condition and minor renovating (own-funds available). Purchase price 255.000 EUR. During the pre-deal analysis, I found that it should be possible to rent out each bedroom for an average of 500 EURO. Kitchen, living, and bathroom are shared. The mortgage on the house is 1000 EUR/month.

Initially, my idea was to split up the living area and create an additional bedroom (5th). This would mean an additional 500 EUR/m income potential from the additional tenant. For renting, foreign students, the targeted tenants, care more about the bedroom size and less about common areas of the house. Note: by splitting up the living are the property would have a relatively small kitchen and living area (yet I believe to be able to still get tenants). Demand for renting in Amsterdam is sky-high.

Yet, after talking to a family member this weekend to share my new purchase, I got some doubts. I was reminded that splitting up a living area like this would mean fewer future buyers of the house. 5 bedrooms and 2 baths (I'd would create an additional one bath compared to current status) combined with a very small kitchen and living area. This unusual set-up is, of course, less attractive for a family/future buyers.

Now, I get second doubts if should create that 5th bedroom to maximize renting income (2500 EUR/m). The property would already by cash flow positive with just 4 bedrooms (2000 EUR/m). As mentioned earlier mortgage would be 1000 EUR/m. Although I'm active in a different market than the US, I'd really appreciate any advice. I'm young and very eager to learn from your feedback.

Thank you for help BP-community!