How to lease a property with construction in the backyard?

Hi

I fear I have made a grave mistake with my Logan IP.

The current tenants are moving out of the 3bdr highest at the front of the block, and coincidentally I have decided to divide the property and build a granny flat at the rear. I will be removing half the backyard from prospective new tenants as well as about 4m of side access on one side of the house. The entire block is a rather large 1400sqm and I will be leaving approx 700sqm total land for the current dwelling grounds.

So I instructed the PM to drop the rent by $40pw and advertise the front dwelling as if they have already lost half their backyard... i.e. contract specifically states the boundary of their backyard so I can put up a fence at my leisure when I'm ready to start construction, without any argument.

The PM agreed that this would be a fair discount, as they still have an average suburban size backyard remaining. At the first open house this past weekend she reported a strong attendance with 13 groups through. Upon inspection, each and every one of the prospective tenants baulked at the prospect of losing half the backyard and enduring construction on the other side of the fence (even after the PM explaining the reduced rent deal on the phone before they came to inspect). Alas, no takers...

Should I drop the price and/or instruct the PM to canvass offers and take a hit while I construct?

Should I increase back up to full market price with full property access and sign tenants up to 6 months, meanwhile getting everything fully prepared for construction from day one of the expiry of the 6 month lease? At least if the next tenants disagree with losing half their backyard I will be in a position to construct as soon as possible and minimise potential vacancy. Or the tenants may like where they live enough to compromise on losing half the backyard.

I'm sure I wouldn't have such a problem if the fence was already up with construction complete. It just seems as if there is a psychological barrier where they can't cope with losing something from their rental, or are too concerned about construction next door.

Any suggestions? Has someone had experience with this? How have people managed constructing a second dwelling whilst keeping the original dwelling tenants happy?

 

We have leased heaps of properties with a disclosure of construction.

A granny flat is only a small construction.

I would fence off first so they can't see back yard.

Is there going to be a shared driveway?
Access to house?
The construction itself is a deterrent but not a huge one.

 

How long until you are ready to start?

If you are not ready I'd just re-advertise as normal, with a 6 month lease. Then negotiate when you are ready with the new tenant.

Or could you put up the boundary fence now?

 

Uncertainty is the killer for leasing appeal.

Put up the dividing fence, excise the area from the front block. The only thing they will lose is full use of a shared driveway.

They will be none the wiser.

 

What do the ads show? You say there was a strong turn out but they were basing the property on what they (thought they) saw.

The PM could explain that better to inquiries perhaps. I find that not everyone inquires though, some just turn up at the scheduled open time.

The backyard reduction is only one issue - 6 months of noise and tradesman is another. I think putting it back up to full price and avoiding the issue is misleading conduct, myself. I'd get the fence up - can you do that now before construction?

 

The block slopes down towards the back with a rather large deck looking over the whole backyard. Even with a fence they will see the whole shebang. I will try to be smart with the aspect of the new build to maximise privacy for both sides.

Driveway will be separate. I will run a driveway down the side kinda like a battle-axe block.

I don't even have finance sorted yet, haven't engaged a builder or even a town planner to make sure I'm maximising the potential, although I have a good idea of what I want in my head. I expect it would take me a good few months to be ready to go.

No, just a generic listing. I may get the PM to change the wording. She was very upfront with phone enquiries. I would be asking $530pw otherwise.

Here it is:

In this photo the PM has used a shot of the backyard from approximately the point of where the backyard would cut-off, so it's not really very deceiving. There is another 500sqm behind the shot. However, they would lose about 3m down the near side.

 

Here is the rest of it. The driveway will come down from the top right. The small divider fence is roughly where their backyard will end.

I can't build too far back because a GF must be within 20m of the primary dwelling.

 

Why are you putting on a granny flat if you may be able to put on a house and subdivide?

 

At the moment I am in Large Suburban zone so I need the total block to be at least 2000sqm total, or 1000sqm for each new block. Mine is 1400sqm total. What I will try to do is build to subdivision spec, with proper easements ect. This is where I need to engage professional. In theory, if the zoning changes I will meet subdivision code and I can just get the surveying redone and jump through the paperwork hoops.

I want to do a higher quality GF. One that for all intents and purposes just looks like a normal house on a battle-axe block. I will be able to build 100sqm so it will be large enough to feel like a house.

Who knows, a town planner may very well suggest I try to push a subdivision through council anyway.

 

I just had this very issue. It didn't take me long to find a tenant thankfully. Surprisingly, the only thing that people were put off by was the uncertainty of the fencing out the back - not so much the construction.

I'm pretty sure its because it was that I disclosed both the loss of the backyard, as well as the construction itself on the advertising. I think you have to be upfront about both things on the ads.

 

IMO the downside is you're not organised to go right now, approvals, builder/s etc, prior to the current tenants moving out, prior to inspection of prospective new tenants.

No point even putting up a fence/dividing prior to inspection etc incase it doesn't get approved, could take 12mths to organise all requirements, meanwhile you'll end up with a vacant block to mow/maintain. Basically you're not ready.

I'd get a tenant in there as is, get all the approvals etc organised, when you're ready to go (pending builders availability) then decide whether to negotiate with in-place tenant, or put it off until they vacate.

 

Yep fair enough. It looks like I might need to take a step back. I guess that if I leave it until I'm ready and then if that happens to be early then I could offer a rent reduction too good to be refused, so as to have at least some money coming in.

 

When I was in a similar situation I leased the property as is first. Then at renewal put a clause in the lease that I will take the backyard with 2 weeks notice during the lease. Did this, fenced it off and built a house. They renewed the lease again for same rent so was a very good outcome. They even watched the build for me, reporting any suspected activity, took pictures of vehicles stealing products from my building site so we could get it back. And also helped identify when the builder was full of **** in regards to progress and who showed up on site etc.

You just need to find the right tenants at the end of the day. And when you do look after them with gift cards or upgrades etc as they can make your life so easy or hell. Plenty out there that don't mind the situation.

Cheers