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House with two kitchens

Discussion in 'General Property Chat' started by Mancha, 22nd Jun, 2015.

  1. Mancha

    Mancha Active Member

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    Hi all,
    I'm looking at purchasing a very interesting property in Brisbane.
    It is a double story house that each floor was built as a self containing unit (i.e. bedrooms, kitchen, bath and laundry) including both an external separate access and an internal shared access with a lockable door.
    Also double meters for all utilities (i.e. water, gas, electricity)
    The property is not approved for multi occupancy and I am not planning on doing that anytime in the future.

    Assuming that it is rented to a single household, are there any issues with this that I should be aware?
    Is there a problem with two kitchens? double meters?


    Thanks,
    Mancha
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    valuers and thus lenders may cause an issue

    ta

    rolf
     
  3. Mancha

    Mancha Active Member

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    Thanks rolf, can you please elaborate?
    Why would valuers cause an issue?
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Common challenge

    Dwelling set up for dual rental.............. valuer may ask lender to confirm council approval for same

    ta

    r
     
  5. Mancha

    Mancha Active Member

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    I see, so the valuer will ask for approval of muti occupancy and the council will say it is not approved. So won't it value it based on a single occupancy? I can think of a few cases when a single household would want two kitchens.
     
  6. pugstar205

    pugstar205 Well-Known Member

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    It's not in Kelvin Grove is it? I lived in a share house like that a few years ago. The owner deliberately built it that way and lived upstairs with the downstairs having 3 bedrooms and own kitchen, living area and bathroom. The upstairs kitchen was drawn as a library on the plans and totally illegal I think (it was a new build).

    Do you have a need for 2 kitchens?
     
  7. Mancha

    Mancha Active Member

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    No, not in Kelvin Grove. Your case sounds like the owner rented out as a boarding house which is legal if he also leaved on the property.

    In my case, I'm buying it as an IP so personally don't need the kitchen (already have a kitchen in Sydney ;) ), but also have no appetite to renovate right now
     
  8. BazWami

    BazWami Member

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    Many benefits to this type of "dual key" setup.....attractive to mixed/blended families....oldies looking after youngies (vice versa)......the separate meters for consumption appears to take things to the next level though....
     
  9. Michael_X

    Michael_X Mortgage Broker Business Member

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    Picked up a few like that.

    As Rolf mentioned, valuation can be an issue. I've found if it's nicely done up the valuers will ask for council approvals and that's when it can go south.

    A few solutions to this

    - Valuation shopping, use a few different valuers
    - Lower LVR.
    - Get the approval from the vendor

    I had and a recent deal like this in Waterford West. Tried three different lenders, all came back with similar concerns. In the end, we had to take 70% LVR to get this across the line.

    For renting, have this on the one lease. Normally leased to an extended family who want this sort of living arrangement. Better from insurance perspective too.

    Thanks,
    Michael
     
  10. Mancha

    Mancha Active Member

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    Great info, thanks Michael.

    It's a nice property and the numbers stack up fine, but not good enough to go through the hassle of valuation shopping and LVR would be 80-85%, so not sure I'll go ahead.

    In your experience, is this kind of dual key property worth the hassle?
    It's kind of a specialty property that suits only a small % of of renters. Did you have any issues finding tenants in any of your dual key properties?
     
  11. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Very important tip here.
     
  12. Mancha

    Mancha Active Member

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    Yes, and I think even more then just having a single contract. If the property is not approved for dual occupancy, only a single household can reside in the property.
    But what is a household?
    "An individual or a group of two or more related or unrelated people who reside in the dwelling, with the common intention to live together on a long-term basis and who make common provision for food or other essentials for living."
    Meaning, that even if I find two unrelated parties that want to live in the same house (i.e. two families who are friends) they will not meet the household definition.

    I think the target market is more for extended families or families with older kids who still want to live in the same house but want separate leaving areas.

    However, as Michael rightfully said, these properties are not attractive to lenders thus not easy to get finance.
    I'm not sure if any of the brokers on the forum have seen this post, but if so have you would love your view on financing a property that was built for dual occupancy but is not council approved for it.
     
  13. mcarthur

    mcarthur Well-Known Member

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    Hmm, this wouldn't be around Redcliffe would it?
    I just put an offer in on one of this type, but I had a due diligence clause inserted because of the problems.
    Beware of the council (any council) - their rates section wouldn't allow dual rates (again) unless building permits section ok'ed it, so that meant it couldn't be separately rented. The permits section didn't want to allow dual rates again due to the current zoning. Town planner section initially agreed it was built as separate up/down AND had been rented separately for years, but said that stopping the rental changed the situation. They then contacted me back saying it *may* be ok (code for uh oh...).
    I put the offer to get it off the market and do the due diligence.
    Fortunately, I think now, the offer was rejected and someone else's accepted (Mancha?).
    Insurance and bank were going to be a problem as well...
     
  14. Mancha

    Mancha Active Member

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    Nah mate, wasn't me that saved you :)

    Why do you think they would be a problem?
     
  15. Michael_X

    Michael_X Mortgage Broker Business Member

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    Is it worth it? I guess depends on what you are after. I view property investing as problem solving. If you solve a problem that other investors aren't willing to tackle then you are entitled to the rewards. If you don't solve the problem then don't expect to be rewarded. So if you want 7% yields, this is a problem that needs to be solved.

    If it's too much hassle then brick and tile lowsets at 6% yield could work, all depends on your goals and what you want, no right or wrong.

    In terms of leasing, look at the target demographic. In Logan there is a big demand for dual living properties, particularly from extended families so find these are actually easier to lease out. In other parts of Brisbane this may not be the case.

    Cheers,
    Michael
     
  16. Michael_X

    Michael_X Mortgage Broker Business Member

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    On financing, it's really the luck of the draw. All depends on what the valuer says on the day.

    I've had a few where the valuer didn't mention anything about dual living and it passed just as a normal valuation. Other times, if the valuer asks for council approval it becomes a real fight.

    Had one just last week. Property had three kitchens, dual living + granny flat. $385,000 purchase price in Logan council, valuation came back fine with no mention of needing to see council approvals.

    Funnily enough, the nicer the property the more likely the valuer asks if the improvements have been council approved. If the improvements aren't that great, the valuer usually doesn't comment.

    Cheers,
    Michael
     
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  17. 4point5million

    4point5million Well-Known Member

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    Are
    Are we talking about arranging finance for a property set up for dual living currently not approved...but...with an asking price reflective of "approved" dual living?
     
  18. Mancha

    Mancha Active Member

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    Yeah, the property is in a good location in general but not really an area where I'd think dual living is sought after

    Problem is, this house is very nicely built for dual living so I'd expect the valuer to raise a few questions.
     
  19. Mancha

    Mancha Active Member

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    The original asking price "baked" in the fact that it can be dual living but after some negotiations we lowered the price to a more decent range but not good enough. The lowest the vendor was accepting is still an annual growth of 8-9% in an area of 5% growth
     
  20. Mancha

    Mancha Active Member

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    Thanks all for the comments and suggestions.
    I'd decided this property has too many issues and the expected CG and CF are not worth the hassle so back to the search.
    Anyone selling in Brisbane? :)