QLD Logan Granny Flat

For an investment of approx 460K (main house + gf), I'm receiving $670/wk in rent (it was $690 until recently) which I'm happy with. The main house is also a high-set with the potential to make downstairs livable, but I have not gone down that path.

The low valuation was partly due to very few comparable properties, but very questionable in itself. If you take this dual property in Woodridge as an example (16 Bligh St, Woodridge, Qld 4114 - Property Details), it
sold for $520K in 2014, and was returning $710/wk rent. My property has one less bedroom overall and of a similar standard, and yet it was valued at $400K in 2016. The valuation made no sense, and we tried to challenge, but they would only budge $10K.

As this is a long term investment, and I have no intention of selling, then the valuation doesn't worry me. As more dual dwelling properties pop up in the area and are traded, I am confident the valuation will reflect the true value.

 

Good deal

In this post apra, bank valuation doesn't really make much sense to me ( maybe I don't need to go aggressive with borrowing anymore etc)...

One may argue that valuation comes low, you can't move forward in extract equity to buy more etc..but with today's lending criteria even if you get a higher valuation do you really want to increase more debt and go beyond 80% LVR? perhaps change one's mentally saying I am borrowing 70% when valuation comes low if you have no intention to sell..

What really shines is your $670 income or 7.5% yield... does the 60K below bank valuation cause you to sit on the side fence? perhaps yes... but at least your 7.5% allows you to pay your P&I, watching on the side fence and see who is swimming naked.

 

We have a few clients who purchased properties in Logan recently that are achieving around 7.0-7.5% yield without a granny flat. Purchase price around 370-390k renting for $550 a week. Not many available with this yield however they do pop up from time to time and are proving quiet popular with investors seeking great cash flow. A good property manager who is in tune with the local area is essential in achieving these yields.

 

Wow 7-7.5% without a granny flat sounds insane!
Also at 370-390k would mean that after costs, you would have an insignificant amount to make up P&I repayments, like 2k/yr.
I guess in a couple of years when I plan to purchase again (and a lower price higher cash flow property like this), prices will have started rising and I won't be able to get something like that..

 

The Logan Council allows granny flats across its jurisdiction and tries not to get too involved in it, which is good for you. The requirements are quite simple and surprisingly flexible.

Rents are a bit silly too. I had an associate (not a client) rent out a tiny converted shipping container on a tiny piece of land in Woodridge for $210.00wk.... and he did it easily! That said, I'm not sure how he's going now.... I tried to steer clear of that one.

Assuming you're planning to engage a builder to do it properly, the really important part is what you pay for the flat itself. There are some wild prices out there.

 

20 or 40 foot container?

 

20ft!

 

Doesn't surprise me, you can't find much self contained accommodation in Logan for under $260 per week. $210 is cheap!

 

We have sourced a few sites and arranged a few builds, ranging from low-set to high-set granny flats.

I take the point that others have made about using the $150k to buy another property instead however, some people are equity rich and cash-flow poor and this provides a good balance to their portfolios.

In saying that valuations have never been a problem and also all the GF's that we have put together can be separately titled from the main house in the future (i.e. when the client wants to pay the council fees). So there will be an uplift when land values rise and they split the titles.

Site selection is important so you can tick all the boxes.

Here are a few happy snaps.

 

That's an animal granny flat @Chris White! Any chance of posting some figures?

 

$345k house purchase rented at $395pw
$150k GF, rented at $330pw
+closing costs

GF 2.4m+ high, so can build in underneath and create a 3rd bedroom when it comes time to split the titles. Effectively they will be two x high-set homes in the future.

But for now, its just a cash cow.

 

That's amazing.

Are they tenanted or are those rental numbers estimates?

Also, if your client was abroad and knows nothing about development and splitting titles and so on, would it be possible for that all to be done while they live remotely? ie do you manage the whole process?

 

They are actual rental numbers.

We do take care of the whole process (advice, sourcing, negotiation, planning advice, project management and then ongoing property management) as most of our clients are remote or time-poor or don't have the expertise.

 

That's a particularly impressive set-up there @Chris White. It's hardly an auxiliary dwelling anymore.

 

It is by definition an 'auxiliary dwelling', just looks a bit better and with loads more options and potential - which is the whole idea.

 

How big is the corner lot?

 

900sqm

 

nice, hard to find corner lot of that size

Would it be better (permissible?) to do up the ground level during the build, so it is enclosed like a proper ground level but to leave it as a garage usage ? Meaning the walls are plastered/insulation installed,and when ready to convert to strata in few years, the work is minimal?

 

Yes it would and I think that would be a good idea if you were looking to do the work in the near term, i.e. under two years. Underneath at the moment is just road base for the cars and storage. So concreting, insulation, walls, siding for the property etc.. could cost $20k to $30k.

Our client wants to sit indefinitely and just take the cash flow. I suggested that he raise the GF so he had the option in the future if he wanted to duplex. Also if he ever sold, selling with the option to duplex would attract a higher sales price.

We are doing others and are rolling out the duplex immediately. There is a modest $50k to $60k equity gain and still a positive cash-flow. This is better if the intention is to leverage quickly.

All depends on circumstances.

 

i would be interested in building granny flat in the Logan area, but for the 150K cost to build, you can buy a 2 bedroom unit for 180K.

Secondly, would it be easy to rent out a granny flat ? Why would a tenant choose a granny flat when they can rent a unit or house all to themself ? If rental market is tight and hard to find accomodation like it is in Sydney then a granny flat is easily rented out, not sure if this is the case in Brisbane.

Also, what is the setback from the rear fence for a granny flat ? And there is no restriction to prevent you from building a highset granny flat ?