Maximising Rental Income on a Semi

Discussion in 'Investment Strategy' started by kirags, 18th Sep, 2019.

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  1. kirags

    kirags Active Member

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    Hi all, My partner and I have been talking about this and it sounds too good to be true, so it would be great to get a realistic view on this.
    We own a semi-detached home in Mascot, close to the station and airport. So the location is fantastic.
    We plan on moving next year to a new home but are planning some renovation to maximise the rental on what will become an investment property.

    Here is what we want to do and all indicate the council would approve:
    Current property is a 2 bedroom semi (only 90SQ built) on a 350SQ. The rental estimate is 700pw.
    We would add a second level, with 2bed 2bath kitchen and lounge plus a balcony for about 200K = This small investment would generate another rental income of $600pw
    The backyard is VERY long, so at the far end we would build a small, pre-fabricated studio with a kitchenette for $60K = rental income would be 400pw.

    I have spoken to a real estate agent and rental figures are correct. My question is, does this sounds too good to be true?
    Basically, we would have renovation expenses of around 300K, to then achieve an extra $1000pw rental. Thoughts?
    Any considerations we need to be aware of?

    Still unsure how all 3 rentals would be structured and who would get use of backyard and one car space.

    Also, would reno costs/bank loan for reno be deductible if we renovate after moving out?

    Thank you for your comments.
     
  2. Propertunity

    Propertunity Well-Known Member

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    Yes

    You will not be able to get 3 rentals (legally) from one resi property. The max is 2 - house and studio (if council approved as a secondary dwelling).

    The interest component - yes.
     
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  3. thatbum

    thatbum Well-Known Member

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    It does sound too good to be true. Its hard to believe the current property's rental estimate wouldn't be reduced by the fact they have someone living above them and in the backyard.

    And how would parking work?

    Also, you're forgetting that you are unlikely to even get 1:1 return in terms of cost:equity growth - so you might literally be spending money to pay yourself....

    Lots of issues here potentially imo.
     
  4. kirags

    kirags Active Member

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    Thank you all for your replies.
    Ok, I thought the second level would be a stretch.
    But potentially a studio at the back should be doable, no?
     
  5. The Y-man

    The Y-man Moderator Staff Member

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    As per @Propertunity above:
    IF your council allows it.

    The Y-man
     
  6. thatbum

    thatbum Well-Known Member

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    It might not necessarily be worth it. I doubt it would only cost $60k either.

    There's lots of threads on the forums about granny flats - maybe have a look at some of them and some of the considerations and pitfalls other people have been through.

    I've done a pair of them myself, and generally I would caution people considering it - I think it only is worth it for quite specific properties and setups, and not something that is generally worth it for the average place.
     
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  7. ashish1137

    ashish1137 Well-Known Member

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    The only place you shpuld be checking is ypur council.
    There might be few tweaks here and there to get a floor.
    What people don't take into consoderation is that it is mascot and 2 bed rents for 700 to 800 easily.
    Not sure on pre fabricated granny. Have you asked the vendor or approached council to see the usage and what are putting in.
    Rentwise, the numbers were correct. :)

    Regards
     
  8. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

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    I think the spend costs are on the low side, having done upper storey extensions on terraces I think $200k would be a challenge, esp with DA associated costs.

    I have also seen great granny flats for about $130k in Sydney (PM if you want more details) but not sure how far $60k would get you.

    If you can get the DA approval, I think an upper storey extension would be a good idea (minus the extra kitchen) so you can rent out a 4/3/1 large home for maybe $1100pw. The studio could then potentially be approved separately under complying development.
     
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  9. kirags

    kirags Active Member

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    Thanks all for your replies.
     
  10. kirags

    kirags Active Member

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    T
    Thanks for the suggestion. Will definitely look into it.
     
  11. kirags

    kirags Active Member

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    Thanks for your reply. We already own the property and looking at adding one of those pre-fabricated 20sqm studios which do not require council approval (about $25K finished) - We would then add a kitchenette and bathroom - so max 60K for worst-case scenario.
    A real estate agent also suggested to add a tiny house and rent it out - but that is a whole other story...
     
  12. kirags

    kirags Active Member

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    Not really a granny flat - looking at adding one of those pre-fabricated 20sqm studios which do not require council approval (about $25K finished) - We would then add a kitchenette and bathroom - so max 60K for the worst-case scenario.
     
  13. kirags

    kirags Active Member

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    Thank you for you reply
     
  14. Shogun

    Shogun Well-Known Member

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    Who wants to live in 20 m2? my bedroom is 5x5 m so 25m2
     
  15. Gockie

    Gockie Life is good ☺️ Premium Member

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    @kirags, a quick PC tip. Use the "+ Quote" option when you want to respond to many comments for things that can be addressed together. Especially helpful for when you just want to respond to say little things like thank-you to multiple posters etc.
    Just click that on each reply you want to respond to and once you are ready, click on "Insert Quotes" and start writing your message.