Neighbour who did this says its not worth it, but is it?

A neighbour subdivided his property and built a granny flat and sold it. It probably sold for a good price being in a good location.

He then rented his house but said that wasnt worth it that he only got $600 a week rent for it and there was 5000 in damages.

How he is looking to sell his property.

He said to me that its not worth building a granny flat in the back yard because he believes the house alone with all the original land will sell for the same price as the house and granny flat put together or sold separately .

Do you think thats correct that a subdivided property in a good location with a property on each will sell for the same as if the hosue on the original property was sold without doing anything.

If i built a granny flat and rented both the house and granny flat or one how could i assure to get the maximum benefit of the rent and least expenses and losses from the rent that comes in.

Thank you.

 

Adding a granny flat obviously reduces both the sale price and rental price of the main house. It's intended that the value and / or rentability of the granny flat combined with the main house works out more in total.

It'd probably be worth it if he didn't have $5000 in damages and this could have been avoided by doing better background checks on tenants, managing them well and having insurance.

 

In most cases you will get between $0.80 to $1.50 per dollar spent on the granny flat in return.

However you also need to consider that having a granny flat will also reduce the amount of potential buyers.

That said, I have two properties both with granny flats. Would i do it again? Yes.
But I have a buy/hold strategy. If i do sell, it will be far away in the future and the granny flats would have paid themselves off 3 times over by then (ie. my granny flats have a payback period of 5 years, I wouldn't be selling the property until after the 15 year mark).

The granny flat allows me to hold the property for longer without impacting my lifestyle.

However if I was just buying with a view to sell in 2 years or so, I probably wouldn't bother.

 

In NSW you can't subdivide for a gf. If the block is subdivisible then you'd put a house on it.

 

I think the OP is confusing subdividing with simply putting a fence up in the middle.

 

Having no granny flat will give potential buyers (potential developers) more options.

If a site has subdivision potential then it will attract a premium at sale

 

Well I don't think its worth it to build a granny flat and then end up selling either.

Granny flats are a cashflow strategy really.

 

I'm with TB on this. A GF increases cashflows and yield etc. Most GFs are like pools. Some people will NOT want to buy a house with a pool or a GF and others will be looking for a house with them. . GFs may split demand - A larger GF may be seen as a hinderance by some and a must have by others. In many cultures where parents may live with family a GF may drive buyers from those cultures ie Asian etc.

The quality will also affect perceived value. There are some very good GFs that are incorporated into the main dwelling and others that are stand alone. These range between what looks like a shoddy mine workers shed through to high end modular design.

Adding a GF is not a way to enhance property value IMO. What the view of brokers / valuers who see these issues ?

 

I have 2 IP's in Sydney, both with granny flats.
I'd like to think they are well built as well with decent inclusions. Both have their own street frontage and do not impede on the existing property.

But my opinion is that they DO NOT enhance the property value. At best I will get $1 for every $1 spent.