Hi folks, I was hoping that I could get some wise input on my situation.
I found a property that is a duplex and granny flat on one title. Don't expect a lot of cap growth but it's a lifestyle location about 45min from Newcastle (and not a mining town) and I don't expect the rental demand to dry up overnight. Had an offer accepted that would give an 8.5% yield and be slightly +ve CF after allowing for exp's (and hopefully overestimating them). I was pretty happy with it until the occupation certificate showed that the granny flat is a class 10a building and non-habitable.
I got to looking at whether it could be reclassified and found that it's of good quality but too close to the boundary so no chance according to the first builder. I spoke to Somersoft member Brazen and he thinks it could be done but would need upgrades for BASIX and I'd want to allow at least $20k for the whole thing plus a loss of rent while waiting for it to be completed. Vendor wouldn't drop the price to allow for the extra work (would have dropped the yield to 8% and made it CF -ve) and I walked away last week.
Vendor has come back to me today saying that he's been talking to council and they said that it doesn't matter what the occ cert says, the building has been approved and the owner can do whatever they want with it.
Question 1: Does that sound like something a council would say? I only saw the email when I got home about 6pm today so haven't been able to call them myself yet. Vendor didn't get the name of the person he spoke to.
Question 2 **insurance brokers look here** : Even if this is councils view on it, what would the insurers view be? Do you think anyone would cover me for tenant and liability insurance if I rented a non-habitable building on it's own lease?
The vendor sounds like he's getting desperate.. I know he has another purchase due for settlement in October and I think I'm the only buyer. He hasn't said that he'd accept the last offer I made but the longer I wait the more likely that seems.
I'm worried that if I go ahead and find that the flat isn't rentable I'll be in a significant -ve CF position with no real CG to count on.
Thanks for reading
Kirsty
I found a property that is a duplex and granny flat on one title. Don't expect a lot of cap growth but it's a lifestyle location about 45min from Newcastle (and not a mining town) and I don't expect the rental demand to dry up overnight. Had an offer accepted that would give an 8.5% yield and be slightly +ve CF after allowing for exp's (and hopefully overestimating them). I was pretty happy with it until the occupation certificate showed that the granny flat is a class 10a building and non-habitable.
I got to looking at whether it could be reclassified and found that it's of good quality but too close to the boundary so no chance according to the first builder. I spoke to Somersoft member Brazen and he thinks it could be done but would need upgrades for BASIX and I'd want to allow at least $20k for the whole thing plus a loss of rent while waiting for it to be completed. Vendor wouldn't drop the price to allow for the extra work (would have dropped the yield to 8% and made it CF -ve) and I walked away last week.
Vendor has come back to me today saying that he's been talking to council and they said that it doesn't matter what the occ cert says, the building has been approved and the owner can do whatever they want with it.
Question 1: Does that sound like something a council would say? I only saw the email when I got home about 6pm today so haven't been able to call them myself yet. Vendor didn't get the name of the person he spoke to.
Question 2 **insurance brokers look here** : Even if this is councils view on it, what would the insurers view be? Do you think anyone would cover me for tenant and liability insurance if I rented a non-habitable building on it's own lease?
The vendor sounds like he's getting desperate.. I know he has another purchase due for settlement in October and I think I'm the only buyer. He hasn't said that he'd accept the last offer I made but the longer I wait the more likely that seems.
I'm worried that if I go ahead and find that the flat isn't rentable I'll be in a significant -ve CF position with no real CG to count on.
Thanks for reading
Kirsty
