Granny Flats in Perth

[MTR]

Hi MTR,

RE: Getting Insurance for an unapproved structure
Getting insurance is an easy thing. An insurance company isnt going to say no to issuing a policy BUT will they honour it when they find out you had an illegal use? You say they know it's an illegal use and are happy to cover you?? Please provide that evidence because that sounds incredible.

RE: Property valuations with granny flat
It's impossible for me to show you my client's individual valuations. I'm just relaying what they tell me. Some of the info also comes from right here at somersoft plus real estate agents (many here) who talk to me all the time. Sorry i cant provide, say, 20 valuations. Im not a real estate agent.

You'll find (if you search threads) that a lot of my advice to people is to NOT build a granny flat depending on their situataion, the property etc. so I'd like to think I have a balanced approach.

Brazen.

Hi Brazen

The structure is approved for single accommodation not g/flat as I mentioned 2 separate policies. Remember disclosure applies to all policies regardless. Please do your own homework.

I am not selling anything here on SS but posting my experience, good and bad.

Thanks
MTR

 

[RetireRich101]

Am I missing something.... 6.4% is a very ordinary return, you can do this without purchasing a property with g/flat.

MTR

Yeah 6.4% i wouldn't too for a new GF build or existing. Plus that property is what we wouldn't consider building a GF, with only walk thru access to GF and little backyard left.

 

[MTR]

Yeah 6.4% i wouldn't too for a new GF build or existing. Plus that property is what we wouldn't consider building a GF, with only walk thru access to GF and little backyard left.

Yep, I think if you were building you would want a minimum of 10% otherwise what would be the point of this exercise.

I know a few investors who purchased very well in Mt Druitt a few years back paying around $230-270K per property larger block and then building a granny flat at the rear, I am sure these yields would be excellent.

I also like the low entry level, just makes sense to me.

It would be interesting to see how the figures would stack up same scenario look at very cheap areas in Perth ie Medina, Kelmscott etc. whether the 10% is achievable.

 

[Blair007]

Yep, I think if you were building you would want a minimum of 10% otherwise what would be the point of this exercise.

I know a few investors who purchased very well in Mt Druitt a few years back paying around $230-270K per property larger block and then building a granny flat at the rear, I am sure these yields would be excellent.

I also like the low entry level, just makes sense to me.

It would be interesting to see how the figures would stack up same scenario look at very cheap areas in Perth ie Medina, Kelmscott etc. whether the 10% is achievable.

Do you think there would be difficulties finding tenants for gf's in areas like kelmscott etc?

 

[MTR]

Do you think there would be difficulties finding tenants for gf's in areas like kelmscott etc?

Have no idea, perhaps a pm in the area may be able to give you some idea on this.

In West Syd the rents are brilliant and there is high demand that I never ever have any vacancies.

However, initially I looked at the central coast in NSW areas such as Woy Woy, all the g/flats I looked at were generally old and in poor condition and the rents were much lower, I was lucky to get 7% yield at that time.

If you decide to build g/f you would certainly need to know there is a market for g/flat accommodation and the rental return would stack up. Also taking into account that you would need to have the right set up, costings for fencing, meters etc.

MTR

 

[D.T.]

Yep, I think if you were building you would want a minimum of 10% otherwise what would be the point of this exercise.

I know a few investors who purchased very well in Mt Druitt a few years back paying around $230-270K per property larger block and then building a granny flat at the rear, I am sure these yields would be excellent.

I also like the low entry level, just makes sense to me.

It would be interesting to see how the figures would stack up same scenario look at very cheap areas in Perth ie Medina, Kelmscott etc. whether the 10% is achievable.

I had been looking at a couple of places in Armadale, WA for this purpose. A house on a good sized block is about 325k and rents for say 360. A GF (doesn't need to be excellent spec in that area?) cost about 80K and rent for 300 and reduce the existing one to say 325 because they lose their big yard.

625 * 52 / 400 = 8%. I doubt 10's are available in Perth metro unless I'm missing something?

What do you think would be the minimum block size (and therefore the purchase price comes down) for a GF to fit without being cramped?

 

[thatbum]

I had been looking at a couple of places in Armadale, WA for this purpose.

Most of the blocks in the armadale area are already subdivisable so you wouldn't you want to simply do a "normal" retain and build instead?

 

[D.T.]

Most of the blocks in the armadale area are already subdivisable so you wouldn't you want to simply do a "normal" retain and build instead?

The ones capable of that generally have a premium price tag?

 

[thatbum]

The ones capable of that generally have a premium price tag?

Not really from what I can see - if we're talking the basic 3x1 houses on 700sqm to 800sqm. Nearly all of them are R20/R25 or higher.

Also, I'd be a bit cautious about potential rental growth in the long term in that area compared to somewhere a bit more inner city. At some stage in the future its all going to be developed villas and townhouses everywhere in that area.

Despite being a very keen adopter of the new GFs rules in WA, I tend to be very selective in the type of lots I think are worth developing GFs on. I'm working on getting through a couple of them in Hilton, between Fremantle and Murdoch on the main bus route. The lots are ones where nothing else can be done with them development wise.

 

[brazen]

The structure is approved for single accommodation not g/flat as I mentioned 2 separate policies. Remember disclosure applies to all policies regardless. Please do your own homework.

I am not selling anything here on SS but posting my experience, good and bad.

Thanks
MTR

MTR, if the dwelling is already approved as a habitable dwelling (what is it- a studio?), then of course you can get insurance. Im saying if you are illegally occupying a shed/garage and have insurance- this doesn't make it insured in reality. Do you really think an insurance company is going to honour the policy whe they discover it's illegal?

We're talking insurance companies here.

 

[MTR]

MTR, if the dwelling is already approved as a habitable dwelling (what is it- a studio?), then of course you can get insurance. Im saying if you are illegally occupying a shed/garage and have insurance- this doesn't make it insured in reality. Do you really think an insurance company is going to honour the policy whe they discover it's illegal?

We're talking insurance companies here.

Hi Brazen

All the g/flats I looked at were standard structure, just not approved as g/f.
My property is still not an approved granny flat, fully self contained. As I stated it is not under one policy, there are 2 separate policies which cover liability and building for both properties, description and disclosure to insurance company is important. I believe GIO is the only insurer that provides this cover.

 

[brazen]

Hi Brazen

All the g/flats I looked at were standard structure, just not approved as g/f.
My property is still not an approved granny flat, fully self contained. As I stated it is not under one policy, there are 2 separate policies which cover liability and building for both properties, description and disclosure to insurance company is important. I believe GIO is the only insurer that provides this cover.

That's good to know- thanks MTR.

 

[Tonibell]

Yeah 6.4% i wouldn't too for a new GF build or existing. Plus that property is what we wouldn't consider building a GF, with only walk thru access to GF and little backyard left.

Building a GF on a couple of properties in low yield areas have allowed us to hold on to a good property when other we would have sold because of cash flow.

The higher the land value the better sense a GF makes.

 

[INVSTOR]

I'm actually hoping to get $400 to $450 a week for my 2x2 GFs, and they are on lots which I can't otherwise do anything else with realistically. (Heritage area means I can't demolish the existing properties)

why did you choose 2x2 bedroom? What sort of tenant are you hoping to attract?

 

[thatbum]

why did you choose 2x2 bedroom? What sort of tenant are you hoping to attract?

The property is 200m from South St and the circle route, roughly midway between Fremantle and Murdoch.

I figure that between people that want to live near Fremantle, students at Murdoch uni, and people working at the new hospital, I think its an area for above average rental growth.

Rental demand around Fremantle is already generally strong I feel, and we still haven't felt the impact of Fiona Stanley yet.

It was originally going to be a 2x1 but Aaron has managed to work the 70sqm into a 2x2 design, which makes sense over 2x1 for nearly every reason. Probably the best use of 70sqm if you are going that way.

 

[INVSTOR]

The property is 200m from South St and the circle route, roughly midway between Fremantle and Murdoch.

I figure that between people that want to live near Fremantle, students at Murdoch uni, and people working at the new hospital, I think its an area for above average rental growth.

Rental demand around Fremantle is already generally strong I feel, and we still haven't felt the impact of Fiona Stanley yet.

It was originally going to be a 2x1 but Aaron has managed to work the 70sqm into a 2x2 design, which makes sense over 2x1 for nearly every reason. Probably the best use of 70sqm if you are going that way.

Yes that makes sense. have you had any prices for the build?

 

[ricflair]

How long untill QLD follows suit and loosens it's rules up on Granny Flats like the rest of Australia.

 

[thatbum]

Yes that makes sense. have you had any prices for the build?

Still very rough at this stage, but with timber frame construction, and a medium internal finish, it looks like around $110k each turn key. I've budgeted $240k all up for both, which is inclusive of some improvements to the main house's landscaping.

Time will tell - I still have to get past planning approval stage since they aren't quite deemed-to-comply. (Although I'm not worried since it fulfills the general criteria easily)

 

[MTR]

Hi thebum

Be interested in knowing what income you will be generating (yield) from these 2x2 g/f??? I think some of the areas you are targeting may be good.

Thanks
MTR

 

[thatbum]

I've done my feasibility based upon a $400/week estimate each, but I think its a little conservative, and I think I can get $450/week fairly easily.

Its a little hard to guesstimate because there aren't really any new 2x2s in the local area to compare to.

Its also a little different to the usual because the GFs are probably the "main" dwelling on their respective lots. The front existing houses are 40sqm one bedroom duplexes (which I currently get $280/week for, market rate probably $300).

So really I've based my estimates on the assumption the GFs are a rear 2x2 villa for all rental intents and purposes. (the "exclusive" property for the GFs are about 55% of the whole lot).

I think I've just been lucky because my duplex pair lot was essentially perfect for this type of GF development - and useless for most other things.