100k major renovation OR 30k reno and 70k granny flat?

[YPG]

So the thread name pretty much says it all.

Background info: My family owns a 5 acre parcel of land on the gold coast that is within the urban footprint and zoned for LMR 600 sqm blocks. I am currently studying town planning and one day hope to develop this land into 20-30 blocks depending on a number of site constraints such as sloping, vegetation etc., flooding, etc. But yeah back to the question.

The block is owned outright and there is a very old house on it 70+ years (no heritage constraints) that is 2 bedroom 1 bath 2 garage. The house actually looks pretty good and it has a fair bit of character.

So if I had a budget of 100k for the project who thinks I should use it all on the house size to increase bedrooms and a bathroom or perhaps a minor cosmetic reno of 30k with a few structural changes and get a 70k granny flat and try and rent that aswell to get two sources of income?

Any thoughts?
Cheers

 

[lizzie]

rental or ppor?

 

[twobobsworth]

Who are the potential renters in the area, what do they expect and what will be your return on each option?

 

[DaveM]

Adding bedrooms and bathrooms to a quality level (ie not using hardiplank and flat colorbond roof) wont go a great distance with 100k.

If you plan to subdivide the land then why spend $100k on something that will get knocked down eventually?

As others said, look at rental return before and after reno and also likelihood of renting a granny flat. If it was me I would do the minimum to keep the house tidy and rented, and get subdivision underway

 

[YPG]

Here is a little bit more information.

The property will never be used as a PPOR by my family unless exceptional tax benefits are apparent, etc.

The property was left to us in a will 5 or so years ago, before that it belonged to the original owner and is a pre 1985 property so hopefully no CGT. At the moment a family friend has been living there free of charge, but this might change within a short time.

I believe it would definetly need some level of renovation to be rented at a reasonably price (i'm estimating $300-385 per week) as it literally is exactly the same as it was when it was built 70+ years ago. The surrounding area has had a big increase in new home and land packages of masterplanned communities for 420-600k... on 400-800 sqm blocks which are renting for between $440-600+ a week.

The location isn't exactly central but has decent infrastructure, accessibility, growth, etc. But I don't think there are many granny flats in the area say compared to areas closer to the beach.

In regards to who would live there, I think it would suit a number of people because it is quite unique in that is has over 5 acres, 250m+ river frontage, mountain/water views. And for the conservative rental price of $300-385 there arent many options like that in surrounding suburbs - your more likely to find a run down duplex, villa or townhouse. So I know I would much rather live in a renovated house with unique character and big block of land with a front gate.

In regards to the development, I should mention it is a long term goal to develop it, probably not for another 10-15 years. As it is pre 1985 the longer we hold it the better, and we dont currently need the money. And hopefully in 15 years it would have increased in price significantly.

Back to the options:.

- I wouldnt mind spending 80-100k on a renovation if it meant I could rent the property for another 15 years (before demolition) at 25-30k pa+ (450k over 15 yrs - so 450-120(allowance for interest, other expenses, maintenance etc.) = $330k rent in pocket before development ?).

- I think the reno+granny flat option would be good because for 30k you could fix the house up new bath/kitchen/other cosmetic stuff and leave it 2 bed 1 bath and still have a granny flat that is possibly transportable and once development comes you could hypothetically move it to another property - I'm just not sure if there would be a market for a granny flat there-
But say if the new 70k granny flat rented for $270 and house for $385 per week combined 35k pa. So you could pay the 100k off with 3-4 years and any time after that is just free money.

- granny flat may have issues connecting power, sewerage, etc. havent really looked into it yet - just thought it was an option as the property is so big I thought a granny flat wouldnt be as impossing as there is plenty of space to go around


- Perhaps a 30k cosmetic on house would be best and just be happy with 20k pa

hahaha I kind of lost track writing this post - not much structure to it but if you have any suggestions let us know

 

[baby blue eyes]

baby blue eyes Pre 1985 assets lose their cgt status when passed on via death unless it is a main residence exemption and sold within two years or becomes the main residence of the beneficiary.

You have received the property at market value at the date of death and this is now your cost base.

See an accountant for your best options and structure for development

 

[PPD]

You would almost be better off building a brand new home (if possible). I know building prices vary from area to area but in some part for around $120,000 you can get a brand new 4 bed 2 bath 2 car built. Plus claim depreciation. Sell the old house to removalist and knock that of the loan if you get one to build.

 

[lizzie]

You would almost be better off building a brand new home (if possible). I know building prices vary from area to area but in some part for around $120,000 you can get a brand new 4 bed 2 bath 2 car built. Plus claim depreciation. Sell the old house to removalist and knock that of the loan if you get one to build.

Great idea PPD ... Rumpled Elf has built one for around that price in a remote-ish area of SA, so might be an option. Then the house could be kept as part of the subdivision.

I also think the CGT ruling is right ... you'll have to check on that but might make a difference to what you do with the property.

As for reno? I'd do the absolute minimum to bring it up to bare rental standard. Even if you only then got $280/wk ... takes a long time to make $70,000 back at $100/wk extra.

 

[Garry Mac]

So the thread name pretty much says it all.

Background info: My family owns a 5 acre parcel of land on the gold coast that is within the urban footprint and zoned for LMR 600 sqm blocks. I am currently studying town planning and one day hope to develop this land into 20-30 blocks depending on a number of site constraints such as sloping, vegetation etc., flooding, etc. But yeah back to the question.

The block is owned outright and there is a very old house on it 70+ years (no heritage constraints) that is 2 bedroom 1 bath 2 garage. The house actually looks pretty good and it has a fair bit of character.

So if I had a budget of 100k for the project who thinks I should use it all on the house size to increase bedrooms and a bathroom or perhaps a minor cosmetic reno of 30k with a few structural changes and get a 70k granny flat and try and rent that aswell to get two sources of income?

Any thoughts?
Cheers

Hi YPG
Before you consider building a granny flat in sunny QLD, I suggest you check with the local Council. Last time I checked with 3 of the larger Councils (including Gold Coast), you are permitted to construct a granny flat as a 'dependable housing' option. In other words you can 'house' your granny, grand-dad, mother, etc BUT are not permitted to rent as an investment for profit.

Cheers
Garry