granny flat add value?

[ali]

Hi all, I have read heaps of granny flat threads and can't find the answer to my question, but sorry if there is an existing thread.
I was wondering how a granny flat affects the value of the property? Does it add what the granny flat costs, or more, or less? I wouldl love to hear from those who have built one and had the property revalued.
We have just bought a property in NSW that appears to meet all the criteria for the NSW granny flat planning laws.
It is a dead-flat 645-sq-m corner block with a 40m frontage on the side street and an existing house and garage taking up the front half of the block. We plan at some point to fence off a third of the block (back section) for a free-standing granny flat, which would have it's own smallish yard and street access.
The property cost 240k and rent is expected to be $320+ per week for the existing house. Estimated rent for the GF would be $250+. I estimate the GF would cost $80k to $100k to build.
Thanks!
Ali

 

[veseli]

If its a corner block with over 600m2 you can put a duplex there, and both dwellings can be two storey in height, in most Councils.

Having granny flat in backyard is not the best option, when you selling it, only investor would buy your property, not many families or older people would.

If you build duplex, strata divide than you can sell them individually, that really adds value.

Granny flat can not be separated from the house, and must be sold in one line.

Does it add value? it depends of the area, if you are in Sydney and big cities yes, but otherwise no.

This is just my opinion.

 

[devank]

As a general rule, the higher the rental return, the higher the value. However, the purpose of having a granny flat is primarily based around rental return while retaining the property longer period.

 

[ali]

Thanks for the replies. We intend to hold our properties for the long term but just curious about the effect on value for accessing equity down the track. I like the duplex option too but haven't looked into that yet.
Cheers Ali

 

[devank]

Duplex costs a bit of money (~400K) to build if you are not a builder. You could buy another property for that money

 

[josko]

Thanks for the replies. We intend to hold our properties for the long term but just curious about the effect on value for accessing equity down the track. I like the duplex option too but haven't looked into that yet.
Cheers Ali

Hi Ali,

If accessing equity is what you want then a valuer would prob look at it as counting 1 extra bathroom, extra living, extra bedroom etc.

My current house has a huge flat attached which we rent out. I have always preferred homes where I can get some extra cash. I think it would certainly be a bonus when I sell but they are definately cash cows rather than equity cows.

A duplex would definately be better for accessing equity, but that option is not an easy one if you have not been down that track before...in many ways. Another can of worms.

Regards JO

 

[virgo]

Granny Flat

Hi Jo

Just curious on the granny flat attached to your house:

a) what is your tenant like? High turnover?

b) any noise or privacy issues? do you have young kids?

c) what is the rent like? attractive enough ?

thanks

 

[Aaron_C]

It really depends on whether the granny flat can be sufficiently detached or separated from the main house and whether there is access to the granny flat. Otherwise it's not very good apart from the increased rental.

 

[ali]

It really depends on whether the granny flat can be sufficiently detached or separated from the main house and whether there is access to the granny flat. Otherwise it's not very good apart from the increased rental.

It would be totally separate with it's own street frontage and yard - like a villa on about 250sq metres.
Cheers Ali

 

[BV]

It would be totally separate with it's own street frontage and yard - like a villa on about 250sq metres.
Cheers Ali

Ali
Have you looked into subdivision?
Check with your council or a local builder and find out what the minimum lot size for subdivision is and if they have minimum width restrictions?

 

[ali]

Hi BV, I have and I think I may be able to do a dual occ then subdivide but at the moment we don't have the cash! It is zoned low density but similar blocks have dual occ. I don't think I can subdivide without already having built? But I am no expert on interpreting planning documents.
I figured I might put a gf on now to maximise rental returns then subdivide later.
Cheers Ali

 

[veseli]

You can not subdivide later, unless its a duplex.

 

[Rolf Latham]

Hi

Valuation , in the end, will depend on a valuers opinion, which usually is related to the comparable sales available

t
arolf

 

[Shobhna]

Definition of a granny flat (DPU)

Hi Ali,

In the Victorian Planning System, what is commonly known as a granny flat is called a Dependent Person Unit (DPU). It is defined as ‘ A movable building on the same lot as an existing dwelling and used to provide accommodation for a person dependent on a resident of the existing dwelling’. Forget about renting this out! Check your Title. If there are no prohibitions, check for planning controls to see if you can put a second dwelling on the subject land. You have the advantage of a corner block. As a rule of thumb, 300sq m is what is required for a modest dwelling but this is dependent on location and size of your existing dwelling and presence of any easements on site.

Good luck

 

[Propertunity]

As a couple of the other posters have said, the end val of the property after adding a granny flat will depend on what the valuer says. What the valuer says will depend on:
1. Comparable sales. The problem with comparable sales when you are talking about a house & granny flat is that there may be none. Sometimes you get lucky and there will be one or two, but in my experience (and we buy a number of these for our investor clients), there are often no comparables.

What this means then, is that if you took a 3brm, 1bath, 1 car house on land and added a 1brm, 1bath granny flat, that a valuer may have to use 4brm, 2bath, 1 car properties for comparables. This can create another problem (for a valuer) where the 4brm, 2bath, 1 car properties are of a far superior quality of finish / size by comparison to the stock standard quality of the 3,1,1 you just added a granny flat to.

2. A valuer can also use the 'summation method'. This is where he will add together (or sum) the values of the individual components that make up the property. i.e. a 3,1,1 on 600m2 of land + the value of the granny flat build.

 

[virgo]

Value of granny flat

Hiya

i have a house ( 3 bedder) with a granny flat which i bought about 1 and a half years ago...i have just revalued with CBA ; i was pleasantly surprised when the valuer told me she had about 4 or 5 similar set ups with granny flats...

i think therefore it depends on the area we are talking about...where i bought (greystanes in the Paramatta surrounds) there seems to be a demand and therefore no problems with comparables and valuation...

BTW, i bought at 385; spent 20K on reno and revalued at 460
A similar house on Hopman Street with a granny flat just sold for 550K ; nicer than mine tho!!

But, hey mine rents for 640; so who cares??

 

[Propertunity]

BTW, i bought at 385; spent 20K on reno and revalued at 460
A similar house on Hopman Street with a granny flat just sold for 550K ; nicer than mine tho!!
But, hey mine rents for 640; so who cares??

Yeah, but I hear property values are in a bubble and likely to fall 40% - then you'll be crying all the way to the bank.

Oh wait, you are getting an 8.2% rental yield!

 

[ali]

Hi Ali,

In the Victorian Planning System, what is commonly known as a granny flat is called a Dependent Person Unit (DPU). It is defined as ‘ A movable building on the same lot as an existing dwelling and used to provide accommodation for a person dependent on a resident of the existing dwelling’. Forget about renting this out! Check your Title. If there are no prohibitions, check for planning controls to see if you can put a second dwelling on the subject land. You have the advantage of a corner block. As a rule of thumb, 300sq m is what is required for a modest dwelling but this is dependent on location and size of your existing dwelling and presence of any easements on site.

Good luck

Hi Shobhna, thanks for the reply. Luckily in NSW new planning laws introduced to increase the number of affordable rentals allow granny flats to be built and rented out. I am looking into the dual occupancy option now as well (thanks to info posted by yourself and others here) but I want to spend as little as possible to maximise the return and a GF seems to do that, thanks to the new SEPP.
Cheers Ali

 

[ali]

Hiya

i have a house ( 3 bedder) with a granny flat which i bought about 1 and a half years ago...i have just revalued with CBA ; i was pleasantly surprised when the valuer told me she had about 4 or 5 similar set ups with granny flats...

i think therefore it depends on the area we are talking about...where i bought (greystanes in the Paramatta surrounds) there seems to be a demand and therefore no problems with comparables and valuation...

BTW, i bought at 385; spent 20K on reno and revalued at 460
A similar house on Hopman Street with a granny flat just sold for 550K ; nicer than mine tho!!

But, hey mine rents for 640; so who cares??

Sounds like a good buy! I think mine is also in an area with plenty of granny flats - NSW Central Coast - but I'd say most of them are illegal so probably not good for comparables! However, I imagine in years to come they will be more and more common, especially in NSW with the new affordable rental housing SEPP.
I guess the next step is to talk to a valuer.
Cheers Ali

 

[ali]

As a couple of the other posters have said, the end val of the property after adding a granny flat will depend on what the valuer says. What the valuer says will depend on:
1. Comparable sales. The problem with comparable sales when you are talking about a house & granny flat is that there may be none. Sometimes you get lucky and there will be one or two, but in my experience (and we buy a number of these for our investor clients), there are often no comparables.

What this means then, is that if you took a 3brm, 1bath, 1 car house on land and added a 1brm, 1bath granny flat, that a valuer may have to use 4brm, 2bath, 1 car properties for comparables. This can create another problem (for a valuer) where the 4brm, 2bath, 1 car properties are of a far superior quality of finish / size by comparison to the stock standard quality of the 3,1,1 you just added a granny flat to.

2. A valuer can also use the 'summation method'. This is where he will add together (or sum) the values of the individual components that make up the property. i.e. a 3,1,1 on 600m2 of land + the value of the granny flat build.

Hi Propertunity, thanks for the info. If the valuer uses either of these methods, there seems to be little chance they will value the property at less than the purchase price + the cost of the granny flat, which is all I really need. I am not trying to build a granny flat specifically to add value to the property, but to increase the rental return. But at the same time, I don't want the GF to reduce the total value either, because it may limit the market of potential buyers to investors only.
Cheers Ali