Granny Flat #2 - North St Marys

nhg · 22nd Jan, 2015

bumblegoodie said:
good job mate.

I really like the brick design GF. how much to construct?

I'll have to let you know when it's done. Funds are tight atm, may take longer to construct than anticipated, though it's still kicking off in Feb. I'll take a punt at $90-100k ALL inclusive.

bumblegoodie said:
btw, how was the meetup last night?

My wife-to-be asked if I could go over the wedding budget with her. All illusions of how far a budget could stretch were dashed in an instant. So didn't make it to last nights meeting.

Wedding planner is gna have to earn her keep (she's a mate doing it for free, poor girl).

bumblegoodie said:
and congrats on your engagement!!!

THANKS!

pinkboy · 22nd Jan, 2015

nhg said:
My wife-to-be asked if I could go over the wedding budget with her. All illusions of how far a budget could stretch were dashed in an instant. So didn't make it to last nights meeting.

Dissing friends for the wife?

<Insert thumb print firmly on the crown here>

pinkboy

Mindmaster · 22nd Jan, 2015

nhg said:
I wish I wasn't so stringent with my purchases. I would actually have a lot more and have made at least $500k more in the same period of time.

Hindsight...

TBH I am a bit of a rogue when it comes to doing my DD the way I should. I do however conduct a lot of ground work and networking with agents, watch each suburb like a hawk.

I didn't live in Sydney when I purchased my properties. I however knew the suburb like the back of my hand, and had people in Sydney do the site inspections for me.

The best methodology I've personally seen is from Margaret Lomas in her book '20 must ask questions for every property investor'. Highly recommend it.

Thanks nhg, good to know. I have Lomas's 20 questions book and read it carefully. Will read it again before I go IP shopping again.

devank · 23rd Jan, 2015

nhg said:
Total costs.
Purchase $261k incl. stamp duty, purchase costs etc.
Granny flat and renos $140k.

Total cost $401k.
Total rent $650 / week.

Current Reval. $450k. ($100k of that I would attribute to capital growth

I'm not too convinced buying and building GF strategy.

Using your example,
Current Valuation = 450K
Total cost = 401K
Gain = 49K
Current LVR = 89%

Say you didn't build the GF.
Current Valuation = (271K/105%)+100K = 358K
Total cost = 271K +10K reno = 281K
Gain = 77K
Current LVR = 78%

In GF scenario: You have slightly more rent coming in. But, now you have 2 sets of tenants to deal with. Two sets of insurance to pay. Passing water bill is an issue. Land is kind of locked for next 20 years. It might be difficult to sell the property. Some banks have different borrowing rules for dual occ which may limit your choice of banks.

With no GF scenario: Now you can extract equity and buy another IP. Just one tenant to deal with. Land is open for potential bigger developments.

Biz · 24th Jan, 2015

devank said:
I'm not too convinced buying and building GF strategy.

Using your example,
Current Valuation = 450K
Total cost = 401K
Gain = 49K
Current LVR = 89%

Say you didn't build the GF.
Current Valuation = (271K/105%)+100K = 358K
Total cost = 271K +10K reno = 281K
Gain = 77K
Current LVR = 78%

In GF scenario: You have slightly more rent coming in. But, now you have 2 sets of tenants to deal with. Two sets of insurance to pay. Passing water bill is an issue. Land is kind of locked for next 20 years. It might be difficult to sell the property. Some banks have different borrowing rules for dual occ which may limit your choice of banks.

With no GF scenario: Now you can extract equity and buy another IP. Just one tenant to deal with. Land is open for potential bigger developments.

My experience has been very positive.

Values came back fine, came out just over even. I think the problem is most people are building gf's too small or where they just dont fit quite right wrecking the front houses backyard. I hardly ever see a house sold with a granny flat that i would actually buy myself.

Not only is the yield excellent but i am paying only one set of rates (a bit extra for the bins), one insurance policy (i only insure the building). One set of water service charges, i have a meter that the pm reads to split the usage charges. Letting the gf and house has been no problem.

Long term it will yield off it's tits because i put the rents up on the house and gf generally at the same time. So when you put your rent up $10 a week i am putting my two combined up by $20. Less than 2 years into owning the property and the granny flat is now renting for what the house alone was wehn i bought it.

neK · 24th Jan, 2015

My experience with granny flats is almost identical to biz's to the point its somewhat disturbing

Biz · 25th Jan, 2015

I have seen the thread about yours nek, yours is a good example of how to do it properly, well done.

What do you guys think will happen in other states? I know they can be done in WA and Ipswitch in Qld. Im tempted to buy up some nice blocks close to Melbourne or Brissy in the anticipation that they will follow nsw lead. The problem i find now buying in nsw is the cat is out of the bag so to speak and people selling gf capable blocks want a premium for them. Or maybe it is just the boom?

The Dark Knight · 25th Jan, 2015

Sorry to hijack the post but just curious obviously every council is different but can you just buy a block of land and stick a couple of granny flats on it or do you need a main house?

devank · 25th Jan, 2015

The Dark Knight said:
Sorry to hijack the post but just curious obviously every council is different but can you just buy a block of land and stick a couple of granny flats on it or do you need a main house?

You have been in the dark all these times

Councils have no controls apart from charging a fee. This is State initiative.
Land needs to satisfy certain rules. You can only build one GF.
Go through brazen's post. You will know everything you need to know

The Dark Knight · 25th Jan, 2015

devank said:
You have been in the dark all these times

Councils have no controls apart from charging a fee. This is State initiative.
Land needs to satisfy certain rules. You can only build one GF.
Go through brazen's post. You will know everything you need to know

Thanks

nhg · 25th Jan, 2015

devank said:
I'm not too convinced buying and building GF strategy.

Using your example,
Current Valuation = 450K
Total cost = 401K
Gain = 49K
Current LVR = 89%

Say you didn't build the GF.
Current Valuation = (271K/105%)+100K = 358K
Total cost = 271K +10K reno = 281K
Gain = 77K
Current LVR = 78%

In GF scenario: You have slightly more rent coming in. But, now you have 2 sets of tenants to deal with. Two sets of insurance to pay. Passing water bill is an issue. Land is kind of locked for next 20 years. It might be difficult to sell the property. Some banks have different borrowing rules for dual occ which may limit your choice of banks.

With no GF scenario: Now you can extract equity and buy another IP. Just one tenant to deal with. Land is open for potential bigger developments.

It is a pretty big increase in rent, I will be clearing $8k/year. That said, I highly advise clients NOT to build granny flats, they really are not worth it IMO unless it fits your strategy.

I will build that last one because it will not cost me anywhere near as much due to contacts, self management and having cheaper labour costs through my business.

bumblegoodie · 25th Jan, 2015

nhg said:
I'll have to let you know when it's done. Funds are tight atm, may take longer to construct than anticipated, though it's still kicking off in Feb. I'll take a punt at $90-100k ALL inclusive.

My wife-to-be asked if I could go over the wedding budget with her. All illusions of how far a budget could stretch were dashed in an instant. So didn't make it to last nights meeting.

Wedding planner is gna have to earn her keep (she's a mate doing it for free, poor girl).

THANKS!

Hey mate, i think all your profit will be eaten up by the future wedding hahaha

better save now!!! and watch out for the diamond ring!!!!

nhg · 27th Jan, 2015

bumblegoodie said:
Hey mate, i think all your profit will be eaten up by the future wedding hahaha

better save now!!! and watch out for the diamond ring!!!!

No kidding,

Budget was shooting up, then she put on the breaks and showed me an engagement ring. $195.

Yep $195. Then said we should look at getting married at a friends estate.

After she did that, I was like, nope, you are getting what I know you really want. Tiffanys and Co. Ring is coming from overseas in 3 weeks, wedding venue of her dreams getting booked today.

We are selling a whole lot of crap we have lying around that has built up over time.

Anyone after a pool table, great quality ski equipment, stauub cookware, or a 2014 signed brumbies jersey, 90% of this stuff is brand new, unused and still in it's original packaging.

I don't get how the 'Average Australian' can afford getting married. My friend was divorced before she finished paying off the money they borrowed for the wedding.

Tonibell · 27th Jan, 2015

nhg said:
$330 / week rent incl. water. Would have gone for $340 / week as mentioned previously, it was however the Christmas period and I was worried about taking forever to rent.

Total rent $650 / week.

Well done - a good result.

Interested in why the granny flat is renting for more than the main house.

Our experience has been that the granny flat gets about 15 - 20% less than the main house - due to size and having no street frontage or off-street parking.

What would your house rent for without the granny flat at the back ?

With the wedding it looks like you are heading down my path - get ready for the expensive PPOR and the private school fees ! It is all good - but it does change your targets for wealth accumulation and retiring age.

Great times ahead !

neK · 27th Jan, 2015

Granny flat can some times rent for more as its newer.

As Barney from HIMYM says, New is always better

nhg · 27th Jan, 2015

Tonibell said:
Well done - a good result.

Interested in why the granny flat is renting for more than the main house.

Our experience has been that the granny flat gets about 15 - 20% less than the main house - due to size and having no street frontage or off-street parking.

What would your house rent for without the granny flat at the back ?

With the wedding it looks like you are heading down my path - get ready for the expensive PPOR and the private school fees ! It is all good - but it does change your targets for wealth accumulation and retiring age.

Great times ahead !

As Nek said, newer, bigger, better, etc.
House without granny flat, probably $10-20/week more tops.
REA said it wouldn't rent for more than $300-310 tops, I strongly disagreed, I feel I know the market a lot better than more agents I've met so far.

We are looking more at home schooling or specialised schools. Yes it is an expensive future, however she is freakin switched on.

I know it won't be a walk in the park, and have experienced some of this already. That said, revenues are already increasing, affording our 'dream' future isn't coming up as a concern at this time.

westminster · 27th Jan, 2015

nhg said:
Plans for granny flat 3 (starting construction in February)

Navid,

Can I make some suggestions on this design? I am looking at it from a useability point of view and although the changes I suggest might not gain extra rent they will make it easier to rent and keep tenants.

Suggestions
1. If I look at Bed 1 I can't see an easy spot to put a QS bed. The best spot I can find is the window wall but I can't see what size that window is. If it's a Hilite window (1600mm high) then all good. Otherwise I don't think once the door swings open there is space on the other wall. So my suggestion is to move the robe to the opposite wall and yes it will be smaller but I think still large enough.
2. Move the kitchen to the other end of the living area and make it L shape. I feel that having a walk through kitchen is annoying and dangerous being a thoroughfare. By making it L shaped it can encompass a meals area at that end if they wish or they arrange it other ways. The downside is a walk through lounge but I feel this is more practical.

Tonibell · 28th Jan, 2015

nhg said:
As Nek said, newer, bigger, better, etc.

So the granny flat (assume 60m2) is bigger than the main house ?

I understand the "newer" bit - but that is always the case.

It seems that we are getting similar yields for our North St Marys places - just in a difference way. We get more for the main house but less for the granny flat.

I suspect it is due to the design where the granny flat gets a driveway and parking - this goes to the main house with us, the granny flat parks on the street and walks down the side path.

All very interesting.

It sounds like the fun is about to start for you - which is great - and you have a great base for building that dream.

nhg · 28th Jan, 2015

Tonibell said:
So the granny flat (assume 60m2) is bigger than the main house ?

I understand the "newer" bit - but that is always the case.

It seems that we are getting similar yields for our North St Marys places - just in a difference way. We get more for the main house but less for the granny flat.

I suspect it is due to the design where the granny flat gets a driveway and parking - this goes to the main house with us, the granny flat parks on the street and walks down the side path.

All very interesting.

It sounds like the fun is about to start for you - which is great - and you have a great base for building that dream.

What is your yield for the main house?

Ours is $320/week for a 2 bedroom, tiny fibro un-renovated since 1950's.

Tonibell · 28th Jan, 2015

nhg said:
What is your yield for the main house?

Ours is $320/week for a 2 bedroom, tiny fibro un-renovated since 1950's.

We have a small 3 bedroom house adjoining a nice park. The kitchen and bathroom would be less than 10 years old and in OK shape. We sanded the floors, painted internally and clad the outside (to hide asbestos).

It rents for $340 per week and the tennants have snakes for pets.

You seem to have a pretty good deal there.

Granny Flat #2 - North St Marys

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nhg

pinkboy

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The Dark Knight

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nhg

westminster

Tonibell

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