My Slacks Creek, Logan Granny Flat Build

Another way to look at it. The yield on the granny flat purchase alone would be ~12%. Coupled with depreciation could get full return on investment in around 8 years. I would expect as a basic solid brick house it would continue to be productive for many decades after that.

 

Great points and for me early in my investment journey (still a novice compared to people with many decades exp) did suffer from constant maintenance issues which was a real drain in the cash flow. Thankfully, now it has stabilised but during the journey did purchase an off the plan townhouse at the infant stage of the cycle.

I'm in the similar position which I want to improve my cash flow to combat any increases in interest rates or conversion to P+I loans for my portfolio so that even if I was to go away for 10 years, the income from the investments are self-sufficient and building.

On two of my renewed leases, I have requested for my managing agent to add clauses for potential granny flat construction to the tenants. Still need to receive the all clear from my broker and the granny flat feasibility assessment!

 

Excellent points. The decision to build the GF is basucally 150k additional outlay for an additional 300/wk in rent, which is exactly 10% yield, but this yield comes with no land. It's like buying a bond at 10%. Which is OK, but if you want to buy bonds there are corporate bonds paying more than 10% out there, with arguably lower risk profiles than finding and maintaining a tenant.

I build GFs on my Sydney properties, the gross yields on those are around 15-20%. At those yields, I'd buy the bond.

 

That's incredible! What areas would allow yields anywhere close to that?

 

You misunderstand, I mean this is the yield of the decision to build a granny flat on an existing Sydney block.

 

I don't agree with this. Firstly I am no bond expert but I last time I checked there were no Australian corporate bonds with yields >10% that weren't BBB-/junk? Can you give examples of an Australian corporate bond at this level you would conside investment grade?

Also a loan product that would allow me to borrow 90% of the value of this bond with a 30 year loan term?

Also a bond that is unlikely have any material fall in value, (indeed potential to become worthless)

Also one where the yield will increase over time similar to rents?

Perhaps one that will give me several thousand dollars of depreciation tax deductions each year for the next few decades?

Is there a bond with upside potential in the form of future subdivision?

I agree with the principle that the granny flat needs to be looked at as a depreciating investment but I don't agree that it is easy to find low risk yields >10% out there.

 

How are. You going. I would say finishing up.
Pleaae. Some photos would be great

 

Haven't been out to the site for a few weeks but the house is now framed up, windows in roof on, plumbing and electrical connected.

Still a ways to go, expect handover in early July, will take and post a few more pics next time I'm out there.

 

Must be really exciting as you are getting closer to completion. Any issues or problems faced so far?

 

Thanks @jins13 has all been very smooth actually, only a couple of minor things here and there. Had to get a second meter installed at the kerb to avoid the need to dig up the existing concrete driveway. Cost $1900 vs a sub meter which would have been only $500, but at least now the rates notices will show the water consumption for both dwellings so no need for anyone to manually read a sub-meter.

Also will be some extra cost for installing the second electrical meter, need to upgrade the main supply to three phase or something (I am no electrician!) But small extra cost here too.

Aside from that all going well. Very happy with Dixon. Have a nice online portal where you can see how things are progressing, lots of inspections/certifications done at every stage too.

 

Mine was a new board and new wiring to the the street poll.

New earth stake
$3850

100% in your case and mine they know this when quoting but dont say it until you are committed

Hope your. Electrical variation is not as bad as mine.

I also need a OSD tank 5000l so was $3500

Cant wait. To see. It

 

Went and had a look at the progress this week. Starting to take shape and still on track for completion late June/early July. Walking around inside and out it feels like a good sized standalone small home with yard, and decent separation from the main residence, so at this point I am feeling confident that it will rent quite well.

 

Brilliant @Blueskies , thanks for posting. Any hiccups with the build so far, or smooth sailing?

 

Still see similar blocks coming up from time to time. Front place needs more work, and not sure about the side access but 1055m2 and the potential is there:

20 Reign Street Slacks Creek Qld 4127 - House for Sale #128432450 - realestate.com.au

 

How did you get the granny flat more than 70sqm?

I’m looking to get a brick and slab in Slacks Creek for ~$140,000 through a friend of mine.

He said 70sqm was the max? It’s an 800msq block. Should I have gone to dixon?

 

By memory it's relative to your block size. Since yours is smaller than OPs, you can't build a GF as big (memory is hazy so someone will correct me if that's wrong).

 

@DCO90 - 70 m2 is the max unless the block is >1000m2 in which case the max is 100m2.

 

@Blueskies is your granny flat completed and rented out now?

 

Sure is, got the keys in my hot little hand at handover yesterday, and Tennant's moving in tomorrow. Bit flat out at the moment but will put up some pics and a bit of a summary of learnings this week. Really happy with how it had turned out. @jins13

 

Completion!

Well last couple of weeks have been a bit hectic with the Granny flat. Have driven down to Slacks Creek enough times to last a lifetime I think!

In summary, I am very happy with how the project came out. In no particular order some comments about how things went:

Dixon were quite pleasant to deal with, as a large builder they seem to have very good systems in place for monitoring progress of your job, quality control/inspections etc.

• Final house has turned out very well. It doesn’t feel like a granny flat, it feels like a reasonably sized 3 bedder. Layout on the block is really good too. With the dividing fence in place and the separate driveways the separation between the two dwellings is good.
  
  
• Tenants move in tomorrow. Rent at $350/week. Signed a lease a couple of weeks back, but cut it a bit fine actually. Slight delay getting occupancy certificate meant handover only happened yesterday. 2 days vacancy is great but a bit stressful trying to ensure access in time.
  
  
• Tennant’s are friends of the people in the front house. I think this is a great outcome as hopefully they will get along well and both stay for a long time! Plus no need to advertise/letting fee etc.
  
  
• Put up a removable partition last night to effectively turn bedroom 2 into bedroom 2 and 3. I have built it to be very sturdy, like an actual wall, but it could also still be easily removed, maintaining the compliance of the property as a 2 bedroom granny flat.
  
  
• Some issues with internet. Wiring installed to road, I assumed retailer would be able to connect but no, need NBNCo to connect first. Not really clear whether they will connect it to a granny flat either, have read different things. I have paid $600 connection fee, have been told this could take months. The tenants will need to use a wireless connection until then.
  
  
• Final cost - $156K. I have been pretty comprehensive in tracking all expenses. This includes all costs incurred including LMI, Landscaping, fencing, service connections, and changes that needed to be made to the original house to accommodate. The things that I hadn’t anticipated included: Electrical metering upgrades (~$3.5K), Second water meter ($2K), Repairs to driveway due to trenching ($2.5K)
  
  
• Saved money by doing all my own landscaping. Not a work of art, but hopefully practical and low maintenance!
  
  
• Plans now? - Time to kick back and enjoy the extra cash-flow! Need a couple of weeks break I think due to flurry of activity/manual labour at end there, but keen to move onto the next project/purchase after that!