Learning to turn Lemon's into Lemonade??

[Cloudedhouse]

Have an IP in a place called Emu Plains NSW 2750.

PP $355,000.00
Current conservative val guesstimation $370,000.00

approx. 700m2 block with a 3bd brick with single garage on front road access and 3 car garage on rear lane access.
It's close to station, schools and shops.

Historically have had house rented for $370pw and rear garage rented for $50pw. Total $420pw so approx. 7.65% rental return. (Not good enough for our liking)

Recently had seriously looked into knocking down rear garage and building a brick and tile 2 bd self-contained granny flat, with carport on separate road access at rear.

Although not being big enough to subdivide would be a long term hold for us with dual occupancy with expected rental return of $400pw for existing house and $330 pw for GF, total $730pw and increased value of property to $500,000.00. 9.49% rental return.

Benefits would be:
Positive cash flow property
Increased property value
Ability to access equity on increased value
Increased weekly income.
We could look at a second IP

Then Penrith council murdered our hopes and dreams. lol (Maybe a little dramatic but not far off)
They have recently declared that the property is on a low flood island so in 1:100 flood it will be surrounded by water and cut off from roads and in more like 1:150 years it will get wet. They do not permit any changes that will add to the number of people the property can house. The advice of the very sensitive council witch was sell and buy another property. "If it was that easy love I would have sold it yesterday."

The neighbour to the IP built a granny flat last year. We seem to have missed the boat. We have learnt from it.

So now we are back to the drawing board for strategies. We are a DINK couple in our 20's wanting to build wealth and security in a big way. Our goal is multiple investment properties (We tend to like positive cash flow or close to). We also would like some shares and more Super.

The other half was surprisingly 'upset' by councils findings. "Wonder if they'd approve it if we incorporated a heli-pad for emergency evacuation in the plans." (lol) Taking the opinion of 'Get rid of it.' With concerns regarding:
Flood risk
Reduced potential
Inability to develop
Potential implications on re-sale value

All valid concerns.

However I on the other hand took the opinion of "Pimp it". Hold on to it, making the most of it renting the house by the room. (which I have looked into before for this property with a lot of interest) This way it would earn approximately $600pw. Which is more like 10.98% rental return.

Thoughts?.........

 

[evand]

Not sure how deep your pockets are but a lot of developers who are refused go the land and environment court.


http://www.lawlink.nsw.gov.au/lec

Councils waste millions of rates payers dollars defending these developers cases and often lose.

 

[Propertunity]

OK, so once you are 1-100yr flood area, you cannot get a 10 day Private Certifier approval for a granny flat BUT there are other ways.

There will be an AHD (Aust. Height Datum) level which any new buildings have to have their floor level built above. You will need to talk to the hydrology engineer at council - but that talk will let you know your next move.

Also, if you can comply with this height, (needs to be up on bearers and joists I presume, not a slab) then you may get your granny flat approved via the DA process.

Be vary wary of taking advice from the "very sensitive council witch", they are often on $40K pa and think they know everything. (they may not)

 

[Ideo]

Hi mate,

there has been a change in legislation as of Feb 25 of this year that allows you to build a granny flat under the Affordable Rental housing SEPP on low risk flood prone land.

This way you can do it as complying development outside of the council system.

There is nothing in the ARH SEPP about this, but there is a reference to Cl.3.36B and 3.36C of the Codes SEPP (the main exempt and complying development SEPP) that details what you need to do.

Check out the standards in Schedule 1 of the ARH SEPP which I've linked to.

ARH SEPP

The stuff about flood prone land is covered in 3.36C under the Codes SEPP

Codes SEPP

Should go some way to solving your problem.

Give me a buzz if you get stuck.

 

[Ideo]

OK, so once you are 1-100yr flood area, you cannot get a 10 day Private Certifier approval for a granny flat BUT there are other ways.

There will be an AHD (Aust. Height Datum) level which any new buildings have to have their floor level built above. You will need to talk to the hydrology engineer at council - but that talk will let you know your next move.

Also, if you can comply with this height, (needs to be up on bearers and joists I presume, not a slab) then you may get your granny flat approved via the DA process.

Be vary wary of taking advice from the "very sensitive council witch", they are often on $40K pa and think they know everything. (they may not)

As I said, that has been changed. Here's the relevant section about complying development on flood prone land


(1) This clause applies:
(a) to all development specified for this code that is to be carried out on a flood control lot, and
(b) in addition to all other development standards specified for this code.

(2) The development must not be on any part of a flood control lot unless that part of the lot has been certified, for the purposes of the issue of the relevant complying development certificate, by the council or a professional engineer who specialises in hydraulic engineering as not being any of the following:

​

(a) a flood storage area,

​

(b) a floodway area,

​

(c) a flow path,

​

(d) a high hazard area,

​

(e) a high risk area.

(3) The development must, to the extent it is within a flood planning area:
(a) have all habitable rooms no lower than the floor levels set by the council for that lot, and
(b) have the part of the development at or below the flood planning level constructed of flood compatible material, and
(c) be able to withstand the forces of floodwater, debris and buoyancy up to the flood planning level (or if on-site refuge is proposed, the probable maximum flood level), and
(d) not increase flood affectation elsewhere in the floodplain, and
(e) have reliable access for pedestrians and vehicles from the development, at a minimum level equal to the lowest habitable floor level of the development, to a safe refuge, and
(f) have open car parking spaces or carports that are no lower than the 20-year flood level, and
(g) have driveways between car parking spaces and the connecting public roadway that will not be inundated by a depth of water greater than 0.3m during a 1:100 ARI (average recurrent interval) flood event.

(4) A standard specified in subclause (3) (c) or (d) is satisfied if a joint report by a professional engineer who specialises in hydraulic engineering and a professional engineer who specialises in civil engineering confirms that the development:
(a) can withstand the forces of floodwater, debris and buoyancy up to the flood planning level (or if on-site refuge is proposed, the probable maximum flood level), or
(b) will not increase flood affectation elsewhere in the floodplain.

 

[evand]

That's very good advice. I always have a question when i'm faced with that situation in councils, govt depts, banks, whatever. It is:

"Is that your opinion or is that council policy?"

They have to answer honestly as it could get them in some deep sh%te if they dont. Has saved me a lot of trouble with that simple question.

Be vary wary of taking advice from the "very sensitive council witch", they are often on $40K pa and think they know everything. (they may not)

 

[Ideo]

That's very good advice. I always have a question when i'm faced with that situation in councils, govt depts, banks, whatever. It is:

"Is that your opinion or is that council policy?"

They have to answer honestly as it could get them in some deep sh%te if they dont. Has saved me a lot of trouble with that simple question.

Yep. Agree as well.

Especially if you ask for them to provide a reference to the relevant section...

 

[Cloudedhouse]

Thanks. For the advice everyone.

I have new found hope in investigating further with the council.

Im definately willing to give it a red hot go.

However, worst case scenario. What strategy do you suggest if I can not get it across the line.

Cheers.

 

[JWR]

Can you subdivide a build a new house on the back instead of a granny flat? I know its probably better for cashflow with the gf, but for cap gains building another house is probably better?

 

[Cloudedhouse]

The block is only 702m2. Subdivide in would require 800m2(2 blocks of 400m2)

However due to this flood island, even if I had a block of 2000m2. as it is atm I could still not subdivide and build another dwelling. [they stated they are getting a lot of complaints.]

The basis of the council's argument is in the event of 1:100 year flood the property and neighbouring property will be surrounded by water with no roads facilitating exit.

So occupants will have to be evacuated or wait it out on the 'island' they want less people in that position. So they dont allow developments allowing the area to house more people.

 

[Ideo]

Based on a 700sqm block it would be unusual to get a DA for subdivision given the existing development pattern in the area. From memory most of that area has a minimum lot size of around 450sqm anyway (but check that). May be able to do a townhouse style though, but once again, check with the LEP.

Cloudedhouse: If you get stuck on a section of complying development stuff send me a PM or post up the question and I should be able to help. I know the legislation pretty well.

 

[evand]

You could do an attached dual occ. (back to back) on a smaller block. Rather than a detached.

Could be an option for a value add. Check with your council regs.

 

[Cloudedhouse]

Cheers Ideo.

I called the council since earlier posts.

Spoke to third development engineer. I told him that to my understanding my block is not :
(a) a flood storage area,
(b) a floodway area,
(c) a flow path,
(d) a high hazard area,
(e) a high risk area.

Rather just on a low lying 'flood island', meaning it is not likely to flood, but may be surrounded by flood waters.

I confirmed there is already a Brick and blueboard construction on the rear of the block currently serving as a three car garage. Which, I wish to remove and redevelop.

I advised that I am proposing replacing this with an entirely brick contruction of two bedrooms etc. that will be safer and compliant with the SEPP Development standards for flood control lots.

I stated that it is unlikely the development will result in a larger number of people occupying the block, rather will facilitate the occupants using the block in a 'best use' manner.

They have suggested we booking a prelodgement meeting now.

 

[Propertunity]

there has been a change in legislation as of Feb 25 of this year that allows you to build a granny flat under the Affordable Rental housing SEPP on low risk flood prone land.

Thanks for the updated info Ideo...kudos to you.

 

[Cloudedhouse]

Still no real progress with council.

Council stated that bank will have a section 149 in security pack for property.

Got the CBA to recall the SP their response "there is nothing in the packet stating the property is at high risk of flooding." "There is no Section 149 certificate held in packet."

However one council officer, did disclose that the neighbour of the IP who constructed a granny flat in the last 12 months got approval via a private certifier....

Stuck.......

 

[Ideo]

Still no real progress with council.

Council stated that bank will have a section 149 in security pack for property.

Got the CBA to recall the SP their response "there is nothing in the packet stating the property is at high risk of flooding." "There is no Section 149 certificate held in packet."

However one council officer, did disclose that the neighbour of the IP who constructed a granny flat in the last 12 months got approval via a private certifier....

Stuck.......

Why bother with council? Seriously.

Private certifier is the way to go. So much less hassle.

Pay the $50 odd for a S.149 from Council (different councils tend to be a bit different in charges), see what it says and take it to a private certifier.

If council won't certify that it is flood free (as in can't) then a private sector hydaulic engineer will be able to do it.

Step away from the council information desk and move into the light. Council don't want you to go private for one simple reason. They don't get the fees.

PM me if you get stuck and I'll walk you through it a bit more.

 

[PropertyValuer]

Hi CloudedHouse

Prior to starting any project like yours, you would need to complete a feasibility.

* What is your house worth now (actual value, not assumed)
* What would the cost of the GF be, have contracts or at least firm tenders to work from
* What would the property be worth on completion, try to base your estimates on similar properties that have sold in the area, with a GF
* Is there a demand if your area if you sold the property in the future for this sort of set up
* Since the floods throughout Australia in February 2011, banks have tightened there lending practices on flood affected properties.

Finally the return that you first speak about, is it a net return or gross return? If it is especially a net return then you are not that badly off. Good luck with building your portfolio.

 

[Cloudedhouse]

Property Valuer,

That is good solid general advice.

However we are past that stage.

Bought this IP for $355K in 2010. Our bank used purchase price as value. Second bank stated it was worth $370K at purchase. We stayed with our bank.

Reason for value guesstimation, was due to property having not been re-valued as yet, as awaiting council approval beforehand. However expected to be no lower than $370K going on recent sales and real estate agent indications.

I have two firm quotes for the GF both within $1000 of each other at $99 -100K. We are now adding an extra $10K for connection costs. However will have access to more like $150K.(worst case.)

We have met with three local real estates. All has stated on completion estimate value $500K going on two similar properties with GF recently sold in 2k radius from property. However these properties were both over 30 years old and unrenovated unlike our main dwelling was at purchase. The GF's were also not from brick and tile, like ours will be.

Property 600m from station, close to schools, M4, Nepean river and Blue Mtns. Short drive to Penrith CBD. So there is a strong demand for rentals in this area. As for sales, we were looking at a 15 year hold.

CBA have confirmed that they are more then happy to lend us for this construction as the property doesnt get we 1:100 year floods. They do not consider it high hazard.

As of yesterdays rate cut, on IO the existing property is now paying for the mortgage. So we know we are not badly off. However, we would like to grow quickly in the next few years to facilitate moving back to the Northern Beaches and maybe even venturing down the path of parenthood.

Spending $110K to build a second dwelling and getting $330 a week rent for it. Seemed worthwhile to us. gross (330x52) / (110K x100) = 15.6%

The way we are thinking is, we already have the land we are already paying the rates. Why shouldnt we 'best use it' . I dont know of many other situations in which we could spend $110K and earn $330 pw without the cost of buying a new property & paying extra rates.....

 

[Cloudedhouse]

Thanks Ideo,

Think that's definately the way we'll have to go.

The only reason I was going through council in the first place was due to the bank wanting council approval stamp so they could do it as a construction loan.

We have a little progress....Expecting section 149 by end of week and builder is going to get in their private certifier in.

 

[virgo]

lemonade

Clouded House

check your Private mail

virgo