Granny flat build

Hello All

In the interest of sharing, I thought it may be nice to talk about my granny flat journey. In fact, we are building two granny flats (CDC and DA) so I see this as an opportunity to learn and broaden my knowledge in this space. The DA process so far has been a nightmare and I can't see us building this granny flat this year but of course the CDC build is immediate. Please not, even though I am happy to share some information, I'm not willing to disclose the exact location as I'm still active in this market.

Reasons why I decided to build the granny flats
There are so many ways and strategies to invest your money wisely, but at my stage of my investing journey I decided to do this to ultise the lands and take advantage of the rental shortage. The granny flats will rent out for $450 to $500 per week. This will also help reduce our debt level even faster each month.

I acknowledge a granny flat build cost more now than a couple of years ago, but I see it as a cost of doing business.

Granny flat builder
I decided to go with Granny Flat Approvals because they have been around for a long time and some of the members here have used them before in the past. I have also consulted other granny flat builders, but felt more comfortable with using Granny Flat Approvals.

My experience so far has been pretty good, but the main contact, Faraj, is no longer working with the company which I think is a real shame because at the moment it seems like I am dealing with a number of people.

Granny flat design
With the CDC build, we are building a double storey granny flat which will look very similar to the link minus the big patio on the side.
Beacon Hill Two Storey Granny Flat Project Sydney NSW

We decided to go with this build to take advantage of the views and also due to the positioning of the granny flat we were advised this was the best option. Of course, a double storey build cost more than a single storey granny flat.

Next step
Meeting this Saturday to discuss materials and fittings. We will also be talking about a potential design for the DA granny flat which will most likely be a single storey. I was told once we sign the contract, they can commence the build within a week or two.

 

Interested in following along and understanding your journey and how this strategy works out.
What area are your builds?

 

Can this please be moved to the Granny Flats section.

 

I had great experiences with Faraj in the past, any idea where he has gone?

 

A commom misconception is that cashflow is $500a week. If we isolate the cashflows from a GF there is little in the way of deductions...Some depreciation. Some interest. A portion of rates maybe. etcThis can lead to positive gearing if viewed in isolation but often can offset to reduce neg gearing benefits. So tax at marginal rates could be involved which can rack up. I have seen a couple who "lost"their negative gearing to GFs. Or went positive geared and now have to pay tax.

So watch repaying debt since if you get hit with a tax bill you cant reborrow that as deductible. A offset may be wise when you consider a GF using borrowed funds.

 

Faraj is teaming up with another builder/ granny flat company but still in the early stage. He is pretty good value in that he said to contact him anytime if I had questions and etc. He is also contactable on the same mobile phone number.

 

Thank you and I don't think I stated it was "cashflow of $500" per week. I said the granny flat will rent out for $500 per week which has been verified with granny flats rented out in the area and by my property manager.

I'm not an expert in this field, but I have no issues paying my fair share of tax and I don't need negative gearing to get me by.

 

Most granny flats have separate electricity meters but if they don’t have separate meters for water, gas or NBN then do property owner pay for all these usages or there are some way to charge these tenants?

 

I took this information from another forum member about the water. I think you can have a separate meter for electricity and gas too but I'm sure someone here can correct me.

I've actually just completed this.

Two parts to it as mentioned above:

1. Sydney Water; once all the plumbing is installed, you apply with Sydney Water to get the meter installed. This is free of charge. Also, for a granny flats, they will do a 20mm meter which has no ongoing service fee. The larger meters will incur an ongoing service fee. You will receive the normal Sydney Water bills, however on it you will have the additional meter listed with it's usage.

2. Plumbing; the costs will vary depending on a few factors. But the overall works starting from the water mains to the granny: turn off the water mains between your main valve and the street supply (numerous ways to do this - pipe freeze, main valve at street pipe etc), put in a junction before your valve at your existing meter, run a new line off that junction for the new meter, put in a bridge piece, run the other side to where your granny flat feed comes from. I would say at a minimum $2,000 however would not be surprised for it to be a lot over either - there's quite a bit of manual work involved (lots of digging). The copper pipes and fittings alone could come in around 500-1,000 itself.

If you are living in the main house, then it is only the granny flat usage that is of concern - usually not that high and like you have done adding a bit more to the rent is easier. If you are renting the main house and the granny flat, then this would be a decent amount and usually be difficult to just add water on top to the front house rental - not sure this is legal either (obviously can do it without labelling it water - same applies to granny flat but due to the nature of it, usually it's generally accepted by people).

 

Jins this is very helpful - i wish i knew this back in March 2020 - i did not realise but we had been paying for water usage for our tenants (house and GF) since then, but the agent failed to inform us that the private water meter we had installed was not sufficient to charge the tenants. Anyhow, I have been desperately calling around trying to get a plumber to install new piping for the GF so that Sydney water can install a meter - the two i spoke to were clueless and I can't seem to get anyone else to call me back - is there a serious shortage of competent plumbers out there ? Any recommendations in the Parramatta area for a competent plumber woudl be much appreciated.

 

Had a meeting with Granny Flat Approvals during Easter to discuss the internal fittings and colour scheme. It's actually pretty involved as you don't want to have mismatching colours for the granny flat. This was assisted with a program which you can visually see how the different colours will look for the internal and external area.

With the internal fittings, they provided several different options such as doors, flooring, taps, lightening, etc. Ultimately as this is for an investment, we decided to go with standard fittings but upgraded on certain things such as the kitchen tap, front door, shower head and cooktop. Of course you can upgrade your fittings to include all the best stuff, but the price will quickly go up and you need to consider the bond will not totally cover for all damages such as broken stone benchtop and etc.

In this meeting, we selected a single storey design for our DA granny flat which will look similar to the link: flat Bankstown Granny Flat Project - Granny Flats Sydney I was told that they should be able to get DA approval within 3 months and 6 months is the worse case scenario and very slow process.

Next step of the process is the quote the build and the contract. Granny Flat Approvals advised they can commence work within a week of the quote being accepted and the contract signed. Also, they offer a 10% discount for the second granny flat build.

 

I asked about a separate gas meter and they can install a separate meter for a princely sum of $380.

 

Update on DA granny flat. We were recommended another design as this is a cheaper design than what we originally wanted and minus the patio (4sqm), however they can include the patio on this design too.

Not sure if I'm quite on board with the design though as it seems to have abit of wasted space and my personal preference is not to have the the two bedrooms next to each other. Will need to reassess once they provide me the design with the patio.

The Grant Granny Flat Design

 

That's fantastic advice and I def will ask them about this. In this area it's mainly young families and couples.

Can I please trouble you on a floor plan or design?

 

So I've received the first quote for the CDC granny flat which is roughly around $170,000 turn-key. We have not signed the contract yet as we would like to haggle on a couple of things to push the price down.I know there will be additional costs for the driveway, fencing and alot of landscaping which we need to account for. Furthermore, due to it being a double storey granny flat and some upgrades, therefore this increased the overall price too.

Of course there's a COVID disclaimer about this that has impacted on some suppliers and distributors. The removal of the old garage, demolition and proper asbestos removal was roughly around $16,000.

I know someone asked about a separate water metre and they quoted us $1600 for this.

Beacon Hill Two Storey Granny Flat Project Sydney NSW

 

We built two of the aGrant Design with them - in both cases we had double sliding doors off the living room with a concrete deck outside.

We also went for higher ceilings and never had an issue renting them or 5he front house out (nearly 10 year period).

 

No worries and all good. Thank you for your suggestion, as I've asked them to modify the DA design to make one room bigger.

Still currently negotiating the CDC quote but I'm sure we should be building soon. I think the DA project is still months away though.

That's fantastic and I also assume some nice depreciation as a cherry on top. I know other investors in the area have had minimal vacancies and no major issues as well. This journey so far has been fun and it's making me a better investor because I'm learning from this experience too.

I've also requested for a higher ceilings for both CDC and DA as it just makes the place bigger. I really don't understand why people don't select this option to be honest, unless they are not allowed.