Dilemma on the granny flat / dual ocx creation

[Tenex]

I have recently purchased a property in hills area that has 4 bedrooms.

The good thing about this property is that the previous owner has built and approved extension on the house with it's own separate entry from the side of the house a huge bedroom and it's own bathroom and shower plus a rumpus room. Almost like an attached granny flat. So I have 3 bedrooms as a part of the main house and a huge bedroom and a rumpus room at the back as part of this extension plus it's own bathroom and shower.


If I create a wall between the main house and the extension plus putting in a new kitchen, fence off the backyard, redo the plumbing, electricity and change a few other things I can rent it out as two separate places as most of the work is done already. It will be a separate 3 bedder with another one or two bedder (I may split the main bedroom) granny flat style as a separate dwelling.

I brought in an architect who had a look and gave me a few ideas on how to separate the two and get two rents. The house is being settled in the first week of Feb. His suggestion was to do the split properly (ie: fire rated etc) and either dont worry about the council for now OR do it while you are applying through the council and make sure you meet their regulation. So it will then become a matter of paying the application fee.

In the scenario above I will avoid having to rent it initially for the first 6 months and get the approval in the mean time then having to kick that tenant out and do the modifications and rent it out as two.

Council usually takes at least 6 weeks to approve these things and I dont have that long to wait before needing to generate an income out of this.

I have spoken to some people at the council over the phone and the application seems to be simple enough, it is the time issue.

Is there anyone that may have experience doing this so I can better understand it.

 

[knightm]

In the scenario above I will avoid having to rent it initially for the first 6 months and get the approval in the mean time then having to kick that tenant out and do the modifications and rent it out as two.

Council usually takes at least 6 weeks to approve these things and I dont have that long to wait before needing to generate an income out of this.

I have spoken to some people at the council over the phone and the application seems to be simple enough, it is the time issue.

2 thoughts.

1 - If you can use the SEPP (the state affordable housing policy) and get approval via a private certifier then your approval should be much quicker.

2 - If you need to rent the main house out to manage your cash flow then you could get a tenant into the main house on the proviso that they understand renovations are coming and with a lease specifically written to EXCLUDE part of the house. That way if/when you convert the back end of the home they don't freak out and the lease can remain in place. It will be cheaper rent for them, smooth cash flow for you.

3 - (ok I lied about just have 2 thoughts) You need to have enough cash to do this sort of thing so if you can't afford it now then you need to just rent the house out until you have enough cash to manage a period of vacancy. People often underestimate this kind of cost.

 

[marg4000]

I like option 2 above.

However, you will probably be advised to include a reduced rent while the actual work is taking place, as there will be noise, dust etc as well as power and plumbing disruptions.

Legally, tenants are entitled to "quiet enjoyment" of the property, which would exclude renovations unless previously agreed to in the lease.
Marg

 

[Tenex]

2 thoughts.

1 - If you can use the SEPP (the state affordable housing policy) and get approval via a private certifier then your approval should be much quicker.

2 - If you need to rent the main house out to manage your cash flow then you could get a tenant into the main house on the proviso that they understand renovations are coming and with a lease specifically written to EXCLUDE part of the house. That way if/when you convert the back end of the home they don't freak out and the lease can remain in place. It will be cheaper rent for them, smooth cash flow for you.

3 - (ok I lied about just have 2 thoughts) You need to have enough cash to do this sort of thing so if you can't afford it now then you need to just rent the house out until you have enough cash to manage a period of vacancy. People often underestimate this kind of cost.

With regard to Option 1 I would have thought that for any form of dual occupancy council approval is essential and it is the council approval that will take time. So even if a Private Certifier approves that the building is fire rated and done properly as a dual ocx (which can take a week or so in itself) the application needs to go into council que which can take weeks.

As for the other options I am not sure if I can source a tenant who will be happy to pay lower rent (ie: $80 per week less) to put up with the changes. It can mean that the house is much longer on the market which defeats the purpose and the current rental market is not the best market either.



My dilemma is whether I should do the granny flat separation while I am seeking approval for it or just pretend I didnt know, do it properly and get approval from council AFTER it has been done and tenanted.

In any case I will be doing it properly it is just a matter of when the approval comes in.

I have briefly spoken to council over the phone some weeks ago and they said these are simple matters and as long as you do it properly and pay the fee (roughly about 5k including the contributions and what not) they normally get approved within 6 to 8 weeks.

I do have the money to make the alterations but I cannot afford to have it vacant any more than 2 weeks. The work takes days to be done any way as most of it is already done.

Alternatively I will have to rent it now for 6 months then let the tenant go, do the work and re-tenant it.

 

[RetireRich101]

Alternatively I will have to rent it now for 6 months then let the tenant go, do the work and re-tenant it.

I prefer this option. When lease expires, advertise for the property minus the extension that you will convert to a GF.

There will be some disruption to the main house tenant, such as adding electricity and water meters.

I strongly suggest to get approval first, then do the work. You can get the approval work now while the tenants in place.

The problem with 'doing' the work and get approval later:
-- council/certifier requires builder certificate on the fire rating. it is hard to get this from builder once he walks off a job.
-- An inspection by council/certifier at each stage of the fire rating may be required.. If the work is not done to their satisfaction.., headache and extra cost in getting back the builder to re do the work..
-- basix may not be required to converted ext to secondary dwelling, but any alteration to windows may result in basix requirement.. If this is required, you need to satisfy lighting, insulation etc.

Other considerations:
--It might be cheaper to build another fire rating wall next to existing walls, instead of rip down...might minimize some disruption to front tenant.
-- check if there is enough power to 2 dwelling. Once split, the GF will require kitchen stove, maybe aircon etc. Most of old styled home power meter is capable taking single dwelling. Cost and time of electrician when upgrading of meter or in worst case you may need external pole.