Should I Split My 5 Br House to 2 Units ?

I have an investment property (5 Bedroom house) . With some modifications i.e. extra kitchenette, closing-off walkway, additional bathroom,additional door, moving shed etc, I can split it to 2 separate units (3 br + 2 br) and rent out to separate tenants.
Please note that I am not talking about subdivision here, purely for rental yield.
Cost will be about 25-30k. This will lead to increase in rental by about 40-50%.
Only concern is how will it impact resale value.
Need to be confident that I am actually also adding value to the property for capital gains point of view and not affecting it due to short term rental gains. Otherwise funds might be spent focusing on improvements in the property.
Does any one have experience doing something similar ?
Any advice / inputs are welcome.
Thank you.

 

I have a question which is sort of related but purely for my own curiosity, how do you deal with the utilities being split?

 

If you're not confident, then I'm even less confident. These things rarely add value to the property, and usually actually devalue it.

Kinda goes against the 2-1 or 3-1 returns an investor is usually looking for when spending money to renovate a property.

 

Probably need firewall separation.
Marg

 

I'm currently doing something similar, and have been advised to instal a second electricity metre so each area has their own. If you they don't have their own meter and refuse to pay their share of the bill (even if it's in the contract) there's basically nothing you can do.

For water I have just decided to pay for water usage as it's easier than paying for a new water meter and the change in plumbing.

 

This is exactly what I have planned. From my investigation separate electricity meter should be around $3,000 max

 

I was told by an electrician (without actually see the property) $3-4K depending on where the new meter went and how hard it was to seperate the two units.
Sounded pretty reasonable to me

 

Thanks thatbum. I am not confident as I might end up alienating majority of buyers who are after a normal house in good condition. Less demand might lead to lower price when selling. However at the same time it might be more attractive to investors but from my understanding and experience its the owner occupiers are the main drivers of high capital gains.

 

Interesting question. I'm looking at buying a house that's already been split into 2x2 bedders. The yield is great, but I'm also wondering if it's true value is higher than, lower than, or the same as a normal house.

 

Brendon good to find someone in the same boat. What are your thoughts regarding this ?

 

I did one in 2013 in Sydney. Same 2 tenant since then, a real CF +ve.
I did few top up equity release due booming Sydney market. The bank valuer is always conservative, same as a house+ granny. However the sales in open market does justify the true value of these dual income/occupancy, especially in rising/booming market. There will always be a market for these, and I will never want to re-convert them back to a single dwelling.

 

@FastWalker I'm an amateur compared to a lot of people on here but in my situation it seemed like a no brainer.

I've only just purchased the property and am planning on spending 25k on the property but only $10k is doing the separation, electrical meter carports fences. It will bring me an extra $100 per week rent and according to my pm make it easier to rent.
The way I look at it, I'm not planning on selling it at any stage in the near future and it will only take 2 years for the extra rent to pay back the initial 10k investment. If I did have to sell it I think advertising a property that is straight away CF+ can only be a positive.

Your situation may be different but for me it seemed like a no brainer!

I think the area of your house, and how long you're planning on holding the property could dictate whether or not it's worth your while.

 

Hi there. Did you proceed with the split? $100pw seems far too low to make the change. A split in the accommodation or granny flat should add say 75% of the existing rent, or almost double the existing rent, as there are a few additional costs that can eat away your cash-flow. One cost is probably higher vacancy so the PM is wrong that it is easier to rent than a single house, even if its large.

 

Does this sort of split fall into council requirements (is it required to be notified etc)?

I remember reading here about someone who did an up/down split in their house and had council arrive for an inspection. Not sure how that one ended. On another forum the owner had council turn up re the "boarding house".