Convert to boarding house impact on value?

Discussion in 'Commercial Property' started by Tim86, 24th Oct, 2016.

Join Australia's most dynamic and respected property investment community
  1. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,657
    Location:
    Brisbane
    So Ive got a 6 bedroom 3 bath house with a seperate granny flat. In order to rent out sections seperately I have to convert it to a boarding house.

    So that means things like wheelchair ramps and widening door ways for wheel chairs and adding fire extinguishers and exit signs etc...

    The property is currently in a low residential area. The conversion to boarding house would therefore only allow for rental to 5 unrelated parties. So it wouldnt be a huge boarding opportunity.

    Rent would be about $1150pw.

    Now my question is, if the house is currently worth $750 000 as a normal dwelling. Would the conversion to boarding house increase the value of the property. Or would it in fact limit the market that would want to purchase it a lot and reduce the value of the property overall?

    My thoughts are if you get a couple hundred a week extra in rent by converting it, is that really worth it if youve just reduced the capital value of the property by 50k?

    Thanks
     
    Perthguy likes this.
  2. Colin Rice

    Colin Rice Well-Known Member

    Joined:
    9th Jul, 2015
    Posts:
    2,045
    Location:
    Perth
    Whether you are going to be better or worse off depends on your individual circumstances.

    There are many factors to consider before proceeding. A quick google search came up with this article which makes some very good points: Renting by the room

    If the property can be easily and inexpensively reconverted it may be a good move in order to increase cash flow, but as the article states it can end up costing you more in expenses all things considered.
     
    Tim86 likes this.
  3. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,657
    Location:
    Brisbane
    Yeah lots to consider. Seeing as how you are a mortgage broker. I wonder if you could tell me what the bank would do with the homeloan etc... if I tell them the residential dwelling is now a commercial dwelling/boarding house? Higher interest rates? Remove the loan completely?

    Property is with nab
     
    Last edited: 24th Oct, 2016
    Colin Rice likes this.
  4. Colin Rice

    Colin Rice Well-Known Member

    Joined:
    9th Jul, 2015
    Posts:
    2,045
    Location:
    Perth
    Depends on what the valuers comments will be once a valuation report is triggered so it may be deemed commercial and LVR will be circa 60-70% LVR with a higher rate and different conditions applied. You may not have enough to reduce the current LVR?

    Rental income will be shaded at 80% based on the current market rent as a normal residential property. So if you are collecting 1k in rent per week as a boarding house and market rent is $600 bank will use $480. This may effect current and future serviceability depending on your particular circumstances.

    Not to sound like a broken record but you would be served well if you got a forum broker to run some scenarios for you based on short, medium and longer term goals with ALL the facts in front of them.
     
    Archaon and Tim86 like this.
  5. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,657
    Location:
    Brisbane
    I'm thinking this whole boarding house thing might not be worth the bother.

    With all the hours I would have to put in to make the house compliant, I could spend that time renovating 2 houses and make $100k.

    Think I'll just be selling this one...
     
  6. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,646
    Location:
    Brisbane
    probably no need to do wheelchair accessible. Normally can get an exemption
     
  7. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,657
    Location:
    Brisbane
    Oh okay. Im going to ignore what my current certifier is saying and email the certifier you recommended.

    Thanks

    Tim
     
  8. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,646
    Location:
    Brisbane
    Your certifier is looking at accessible requirements. You either need to comply with these or seek an exemption. When you build new there is no exemption, when you have an existing dwelling then you might be able to justify based on supply of accessible dwellings v demand in the area.
     
    Archaon and Tim86 like this.
  9. Col333999

    Col333999 New Member

    Joined:
    30th Oct, 2019
    Posts:
    1
    Location:
    sydney
    Hi hope you can provide your recommended certifier's contact details please for converting a big house to a boarding house thanks