Would you really go granny flat

What if you generate so much surplus cashflow from them that it is enough for a deposit every year?

 

@Biz

Yup that works even better.

$300 p.w. x 4 GF = $62400 a year

Enough for deposit.

Its good to have bread and butter portfolio.

However, not long ago cost of building GF was $60-$70k.(no council contribution). Now, I am seeing people are paying $100-$120k (plus 5-10k council contribution)

Plus, GF potential sites are selling for little premium.

Considering above factors, GF doesn't make a sense ATM IMHO.

 

Yep the horse has bolted, especially in Sydney no way it is worth it now unless you have owend the property prior to the boom. Like you say any site with side access is selling for a premium even if it isn't really suitable for a GF. Even after doing a GF you would still be negatively geared.

 

You still need 400k to build them. Wouldn't you rather have 4 IPs spread around the country instead?
Every year you should be able to access equity from one of them.

 

That's the dream but it doesn't really happen every year. I would rather have the cash in my pocket today, save it and deploy it where required.

SHOW ME THE MONEY!!!!!

 

Agreed cashflow needs to balanced with CG & Portfolio expansion

 

Intresting thought

 

we had bought earlier so consolidation stage now

 

I didn't mean every year for each property.
In my example, you would have 8 IPs. So all you need is equity increase in any one property within 8 year period.

 

Devank, if you have 8 IP's and not strong cashflow (or a strong income) to go with it you are playing with fire.

 

I purchased my house in Doonside/Syd had a.. studio accommodation, I think that is what it is called?
Basically the accommodation is 1 room with toilet shower. I purchased this about 4 years ago for $315,000. The vendors teenage son was living in this room at the rear of the property. The front property had been renovated to a reasonable standard, new kitchen, painted etc.

I am from Perth so flew over and was really wondering how I was going to overcome the kitchen issue, I mean there was no kitchen or laundry. I then organised a local tradesman in the area to build a partly enclosed pergola with built in kitchenette/BBQ and fittings for washing machine, I think that cost around $2800-$3500??

I then got a fence erected to completely cut off the 2 properties so they both have separate access, its works very well.

Front property rents for $380
Studio $220
$600 pw

I have never had a problem renting it out, always gets snapped up in a week. However, only had 2 tenants, to date, but clearly there is demand for this type of property in this area.

MTR

 

i meant to investors who already have few Granny Flats!

 

When Brad Hazzard was planning minister in NSW, his departments were discussing, Brisbane city council style planning control.

there was a discussion that any block that have 600 Sq meter or more land, will be allowed to subdivide in to two separate lots.

i believe that later or sooner, similar planning control will come it to affect.

Once NSW government completes forced council amalgamation, it will have better control on planning and subdivision.

if you have bigger block with 6 in front, i would suggest to hold off on any plans of Granny Flat. i am pretty sure that better planning controls are on its way. just not sure how soon

 

For me it depends on the area as well as the site itself.

The granny flat would need to return about 18%-20% or bring the entire site to neutrally geared (in this current market to do it).

My last purchase was in 2013, put a granny flat on it, and the overall site return was 7% on the rental income side. Growth wise, it has been quite substantial.

In hindsight, I could have used the money to purchase another place and probably made more, but then lifestyle wise, my family wouldn't be that comfortable with it and the bank may not have given the funding.

 

Why is that a house with Granny Flat is harder o sell at higher price @devank ?

Go to Campbelltown area and you'll see the house with land size more than 500 sqM some of them sold for higher than $670k even when the asking price was just $500k.

This is true experience since I went to survey those area last couple of weeks and lost the bidding to typicall Sydney investors from asian suburbs ...

 

In relation to cash flow vs CG I think it all comes back to your strategy...

I moved into my first IP, we have now bought another 2 in the past 6 months and our now saving for our O/O property (will rent out the original IP again).
We knew we would be buying our own place in a couple of years, but we wanted a few properties under our belt before life takes over and we get married etc and 3-4 years go by, so knowing that we bought the latest 2 in QLD which are cash flow positive with scope to add GF's...
We want to spend approx $600-$650K on our O/O so didn't want to burden of that mortgage and a couple of other IPs neg geared putting too much pressure on us (even though we both have professional jobs).
So if equity is there in a year or so we may draw on it and do a GF on one of them.. Use that cash flow plus the Cf+ of the portfolio to build a nice offset balance against our OO, lower LVR's wait on some CG and then go again..

Apologies for waffling on, but just pointing out its horses for courses..
I do agree with putting your fingers in as many pies as possible early in the piece, but it must fit in with your strategy and risk profile..

 

how about a granny flat in Deer park in Melbourne, is this a good idea. as i am in middle of it whether to convert a garage (double garage with bricks) into a G/F or not.

 

How did you go selling @MTR ? Did it take a while? I'd imagine that would be another down side, pretty much just targeting investors.
I watched a gf get built driving home eachday work it was the battle axe feel which was done well but it was on the market for a long time. the price was based to match rent return.
It wad in west syd, house say 400 + 100k. Rent 400+250. Asking offers over 650. I might search the address to check the sale price

 

Houses with Granny Flat are generally harder to sell in my opinion as they cater to a very specific market.

 

The g/flat in Nerang sold at auction, the market started to rise and I just offloaded after 12 month, the projections of the rental returns were woeful due to the length of vacancy.
I purchased this property for $360K and sold for $418K. Wont be doing Nerang g/f again

MTR