5bed investment or 4bed+1bed attached granny

I’m looking at a place in the central coast and it’s a 4 bedroom home with a 1 bedroom separately metered attached granny flat. It’s got long term tenants right now who use the attached granny flat for their mother. (a literal granny flat)

Is there any downside to buying a place like this over a regular 5 bed home? The granny isn’t an extension, and I think must have originally been part of the same building. From a yield perspective it seems appealing that we can offer it as a 5bed or a 4bed with a 1bed as a seperate listing.

 

There are pros and cons to granny flats. It really depends on what your plan is with the property you are purchasing.

If you are purchasing as a PPOR and your family is going to be comfortable in a 4BR house, the 1 BR granny flat can help you pay off your mortgage sooner. This could work if there is good separation between the two dwelling and both having its own private open space as well.

Keep in mind that when you do decide to sell it later on - the house + granny flat configuration mainly attracts investor buyers due to the yield. If the two dwellings can be leased separately (council approved granny flat and separately metered), then the potential for yield is higher. Hope this helps.

 

Even though separately metered you would want to ensure two things
1. that the granny flat has been construction in such a way (especially fireproofing) so that it complies with building regulations to be separately leased
2. That the local council allows 2 leases on the one site.

You don't want to buy something that has fantastic yield due to be able to rent to 2 people then find out that Council issue an order to only have one lease and you have to kick out second tenant and go to normal 5 bedroom type yield. Or the granny flat tenant has a fire and it then engulfs the rest of the house and you find that your insurance policy doesn't cover such a set up without fire proofing and you've just burnt down an asset with no claim against insurance.

 

Right there is the two most important aspects of a multi-dwelling property.

If anyone complains and it is compliant to council standards and correct leases are in place there really is nothing to see and no further action, from council's POV.