How much a granny adds to the valuation?

Discussion in 'Loans & Mortgage Brokers' started by Ethan Timor, 1st Mar, 2017.

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  1. Ethan Timor

    Ethan Timor Well-Known Member

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    Hi all,

    We're about to add a GF to one of our properties and then refinance the property to get the investment back (more or less) in addition to the higher CF.

    Am wondering if members here that have done this before are happy to share costs and by how much the property value went up afterwards (for example: cost to build $100k, added $120k to the valuation).

    Thank you! :)
     
  2. Biz

    Biz Well-Known Member

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    Depends on the area. Sydney is generally $1 for $1. Regionals can be a bit of a crap shoot. Anything from .60 - .90 for $1.
     
  3. thatbum

    thatbum Well-Known Member

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    Never heard of a GF increasing value more than the cost. I think less than the build cost is usually typical.

    The ones I built in Perth were valued around .85c in the dollar, but then lowered my accessible LVR from 80% to 70%. I think that might just be an ANZ thing for two properties on one title though?

    So watch out for a possible double whammy to usable equity.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I agree with Biz. Most of the ones I've seen (almost all in NSW) are roughly 1:1. The real value is in the increased rental income, which is often as much as a 10% yield on the cost of the GF.
     
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  5. lightbulbmoment

    lightbulbmoment Well-Known Member

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    SFA ive seen before. Dont add much
     
  6. Redom

    Redom Mortgage Broker Business Plus Member

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    In Western Sydney - 1:1 usually.

    Some other parts, can end up with a bit more (eg northern areas) - they do rent for heaps there (~600).

    It's hard to tell because the markets been moving so fast in last few years (market based factors, different valuers, etc).
     
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  7. RetireRich101

    RetireRich101 Well-Known Member

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    None from bank valuation for equity release point of view. But in an open market transaction, especially in a rising/boom market , likely yes.

    Say you spent 450k for the main property and added 120k GF, so total cost is 570k. Say the suburb grew 20% in 12 month after the GF was completed.

    Me thinks, the entire 570k is apportion to grow by 20%. Just my observation in an open market transaction and rising/boom market and Sydney West in the current boom.
     
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  8. Ethan Timor

    Ethan Timor Well-Known Member

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    Thanks all!

    In our area (northern rivers NSW), it definitely adds to the valuation. Based on market research, we estimate it will add 0.9 to 1.2 on the dollar, but guess we'll see when we'll see.

    The plan is to refinance after the reno is done, then add the GF and refinance again. We'll see :rolleyes:

    P.s. - happy to read as many experiences on this as you guys are happy to share so please keep them coming :)
     
  9. DaveM

    DaveM Well-Known Member

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    Granny's dont tend to add a lot of value unless you are partial to a home made slice and cup of tea. In which case the valuer may overlook the lime green benches and doilies
     
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  10. Chreee

    Chreee Member

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    The thing with valuations is they look at the gf as an extension of the house and not for its increased yield. So instead of a 3 bed 1 bath, they'll value it as a 5 bed 2 bath. Hence the increase in value. The problem with this is in an area where 5 bed houses are uncommon it becomes hard to find comparisons. In addition they look for houses that are 5 bed with the same setup ie house and granny which is even harder to find recent sales and comparisons for.

    My experience has been1:1 in sydney
     
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  11. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Don't think I've ever had a GF on completion val come back at estimate property value + GF construction costs.

    Off the top of my head - I'd guess it's closer to 75% of GF costs.

    Not really a value add item (harder to sell due to limited pool of buyers) but do increase yield due to extra income stream.

    Cheers

    Jamie
     
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  12. Corey Batt

    Corey Batt Well-Known Member

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    Generally 80-100% of costs - I always tell clients to work on 80% when doing the numbers to make sure they're not going backwards on the overall deal.

    With granny flats, always be mindful to accurately calculate how this will impact the original houses rent, there is going to be an inevitable decline in rent on this property, but should be offset more than enough by the GF.
     
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