Latest granny flat prices

Well written report
I agree 100pc with you
For a brief time the yield looks good but once you take into account the depreciation you will probably find the net yield is not that good
A normal house has a limited life
A GF is likely to have a shorter life

The increasing value of land means the land needs to be better utilised hence even quality buildings are demolished to put something else on the site

GFs may well be demolished prematurely

When you assess the feasibility of a GF please take into account the depreciation of the unit (even over 30yrs to 40yrs the cost of depreciation is significant and it may well be demolished after just 20yrs)

 

Spoken like someone who isnt allowed to do them.

They are a great idea. Can generate income, or can serve as additional accommodation, or can serve as inlaw accommodation, or can serve as their name suggest- as parental/granparent accommodation. There are advantages galore.

In Vic, only allowed to be used as dependent person units - way off the pace Im afraid.

 

I disagree, granny flats are just as important if not more so in the acquisition phase. When you have reached your serviceability wall, the GF strategy will allow you to hedge your risk on the property. I see it as a way of making your investment as close to risk free as possible.

You could still acquire that extra property after building the GF as you have more income and the increased value will give you the equity to purchase another property.

I have 4x granny flats in Sydney. This extra income pays all my land tax, council rates & insurances for my 4 investment properties plus owner occupier. It also covers the interest repayments on my PPOR which is about $870 per week. So basically it allows me to live for free in my own house and gain the tax free capital growth on my own home.

Not when it allows you to build a larger and lower risk portfolio.

 

I welcome the questions, but the two conclusions you have reached are flawed.

To your comments on price. Jump on re.com.au and look for new 4 bed homes in Orange or Bathurst on 850-900M2 lots and you'll find them at mid - high 400's. Then buy one. Then contact a builder and add a granny flat. You wont get much change from 600K or more.

Or jump on re.com.au and find new 5 bedders in Orange or Bathurst - you wont get much change from @600K.

In fact, you'll find that just a new stand alone 4 bedder in Orange or Bathurst - minus a granny flat , will cost you @440-480K these days. Add 120 + (at least) to add a 3rd party providers granny flat, and you wont get much change from @600K.

Im delivering a 200M2 4 bedroom house and a detached 60M2 granny flat , on 900M2 lots at 530K. Not vinyl clad either.

FYI - just completed a 3 bed + granny flat from same builder on 700M2 lot in Orange. Bank valuation at completion, from 3 different valuers - Opteon, Saunders Staniforth and HTW ???? 540K, 540K and 550K. yet amazingly, my clients are purchasing 4 bed + 1 bedders at 530K... I wonder what their valuations will be on completion? I'm not sure how you possibly conclude they are "pretty expensive " ?


To your comments on cash flow. The cash flow on these dwellings run 4-6K CF+, pre tax. And that's calculated using very conservative weekly rental estimates for the house and granny flat - and they are well below market deliberately, so as to ensure a tenant is ratained year round. I have estimated $400 for the house for example, and $220 for the granny flat for example. But again, anyone with an internet connection can see that is well below full potential market rates, so they could run at 440 and 260 respectively, which would add an additional 4K per annum, taking their pre tax yields to as much as 8-10K CF+ . The depreciation then adds @ 2-4 K of additional cash flow, post tax. So whether using conservative rental estimates ( as I have ) or aggressive rental estimates ( which I have not) , the depreciation delivers a very small percentage of the total yield. Therefore I'm not sure how you conclude they are reliant on depreciation?

I really do welcome scrutiny, but it would be helpful if the scrutiny was well considered and soundly argued, rather than an opinion not supported by facts.

 

@euro73 When i looked at the designs, i noticed the granny flats were one bedroom. I would have to ask, why one bedroom and not two. 60sqm is 60sqm, so designing a more optimal design to fit 2 bedrooms I would assume be much preferred and widen the market even at the same rent. You can't tell me it costs substantially more to put up 2 extra walls.

The 2nd interesting item is the setbacks. Not sure what rules allow such set back and is interesting the private certifier allowed this at all. The granny flat has a rear setback of 0.9m and frontset back of 2m. Regardless of which side you nominate as front for setback purposes for the granny flat, this shouldn't be possible. I copied and linked the sections of the legislation that referred to the setbacks in a PM to you previously.

 

Well, as several have settled and received OC's, and all others have received council stamped plans to commence construction, I guess your views and the certifiers views will have to remain different to each other

 

@euro73 not my view - legislation view.
Anyway, moving along, what about the 1bedder vs 2 bedder?
Wouldn't it be better to create a 2 bedder to widen the audience as opposed creating a larger 1 bedder? It's still 60sqm, so material wise its all the same (bar 2 plasterboard internal walls + 1 door).

 

Yep...looking at doing that for the next tranche.

 

Exactly guys. I think we are on the same page.
My caveats were:
1. Why spend 100k on a 300k asset - investment risk
2. GF is part of a larger strategy (holding or increasing servicing

- I am not a fan of the "20% yield" for the sale of it. If servicing, equity and ability to leverage available, I would look to buy another property, with scope to add a GF strategy should the scenario require (holding ability) later on.

Jump off your high horse bud.
4 x properties in Sydney is key..

 

Afraid?
Far from.
I have 2 properties in Qld bud.
Your comment was cute in any case..
obviously you missed the key criteria I mentioned.

 

I'm afraid you don't understand what "I'm afraid" means.... or that it was a comment directed at the Vic Govt policy re granny flats...

But never mind.... your comprehension is cute

 

Just in case you were wondering... note the word "politely"

 

GPO Sydney "The Sydney Morning Herald" 1 June 2017 page 28 has a quite stylistic 60m2 Granny Flat article

 

Well this thread is about prices and I can't believe 100k-120k is considered normal for just one GF.

 

The smaller the dwelling the higher cost per sqm.
Nothing new about that really.

Would be awesome if they allowed 80sqm GF

 

The problem is the construction industry. There is a serious lack of labour and professionals (architects, hydraulic/structural engineers, civil, etc.) NSW government has got a lot projects running and tradespeople and professionals have the luxury of a) charging a bomb and b) picking and choosing their jobs.

Heaps of people from the central coast commuting to either Sydney or Newcastle due to the volume of work.

 

Yes I agree and see this happening.

I'm just shocked at the profit margin on it. If I built just one GF a year for someone and charged 120k I would make more than my salary in profit. I may just change jobs right now...

 

Some off the granny flats i see on my fb feed are looking very nice/high end these days!.

 

There's also the mortgage protection granny flats provide should:
1. The market crashes/declines/corrects. Adding value to your investment AND additional income is a no brainer.
2. You lose your job and can't meet the shortfall. I remember the last crash (2003) where MANY lost their properties because they lost their job and couldn't afford to sell. A granny flat protects against that.
3. After a 'crash' banks tend to cease lending, so waiting too long could mean you can't even build one; thus exposing you further.

My point is, building a granny flat has many benefits both short and long term. Besides protecting your investment property from unforeseen circumstances, it adds value and money in your pocket - forever. It's all about protecting what you have: Granny Flats Strategy - Protecting Your Sydney Property


Serge Panayi.