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Should I Split My 5 Br House to 2 Units ?

Discussion in 'General Property Chat' started by FastWalker, 27th Jul, 2016.

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Should I Split My 5 Br House to 2 Units ?

  1. Go Ahead, Its Worth It.

    60.0%
  2. No, Don't Do It.

    40.0%
  1. FastWalker

    FastWalker New Member

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    NSW
    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.
     
  2. Dan Donoghue

    Dan Donoghue Well-Known Member

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

    thatbum Well-Known Member

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    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.
     
  4. Marg4000

    Marg4000 Well-Known Member

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    Probably need firewall separation.
    Marg
     
    Propertunity likes this.
  5. Brendon

    Brendon Well-Known Member

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    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.
     
  6. FastWalker

    FastWalker New Member

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

    Brendon Well-Known Member

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    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
     
  8. FastWalker

    FastWalker New Member

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    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.
     
    Allgood likes this.
  9. Allgood

    Allgood Well-Known Member

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    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.
     
  10. FastWalker

    FastWalker New Member

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    Brendon good to find someone in the same boat. What are your thoughts regarding this ?
     
  11. RetireRich101

    RetireRich101 Well-Known Member

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    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.
     
  12. Brendon

    Brendon Well-Known Member

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    @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.
     
    FastWalker and RetireRich101 like this.