How to value a house with existing granny flat - Sydney west

[JayOh]

Hi!

We are looking to purchase our first property - an IP, not PPOR. One property we are looking at is a 3br house with a council approved 2br granny flat.

The house is newly renovated and the granny flat is also fairly new - built in the last couple of years - so no need for any work at this stage. The house was recently tenanted for a good rate, and the granny flat is currently tenanted, also for a good rate. The combined rent makes the property nicely cashflow positive.

I'm trying to work out how much value the granny flat adds to the property compared to similar 3bedders without the flat.

For example, other 3 bedders in the area that have sold recently went for about $80k - $110k less than the vendor is asking. At the moment there are properties in the area for sale with an asking price about $80k less. There are more expensive properties on the market but they are more suited to owner occupiers.

To me this looks like a pretty good deal for a first IP as we don't need to do anything and just benefit from the immediate cashflow.

Is $80k - $110k a reasonable premium to pay for the finished product? I'm assuming that buying, renovating the house, getting the approval and building the granny flat etc would end up costing more than $80k - $110k?

Thanks!

j

 

[knightm]

i think thats about what it would cost to build which means the GF is fully priced in. If you think the vendor is motivated to sell and its been on the market a while then perhaps a lowball offer? If you could get house with approved GF for say 40or50 more than equivalent others then you will have done well. Valuers I have spoken to out there are reluctant to price the GF in all that much.

 

[DaveM]

Unless its on a seperate title, many valuers class it as just another bedroom/living area, and so will value it as a 4br 2 living property. Which I expect is nowhere near 100k more than a 3br home.

 

[JayOh]

I'm not sure that low-balling is an option at this stage - the property has only just hit the market, saturday was the first inspection and there were about 6 or 7 other parties through.. there were a couple of parties looking to make an offer on the spot but the agent will follow everyone up tomorrow and put all the offers to the vendor at the end of the day..

I'm happy to put in an offer subject to finance approval but just trying to work out what to offer. At the asking price the rental yield is about 7.8%.

Dave, the GF is 2br, so maybe the 5br / 2 living space is closer to the $100k difference?

 

[Rolf Latham]

Hi!

We are looking to purchase our first property - an IP, not PPOR. One property we are looking at is a 3br house with a council approved 2br granny flat.

The house is newly renovated and the granny flat is also fairly new - built in the last couple of years - so no need for any work at this stage. The house was recently tenanted for a good rate, and the granny flat is currently tenanted, also for a good rate. The combined rent makes the property nicely cashflow positive.

I'm trying to work out how much value the granny flat adds to the property compared to similar 3bedders without the flat.

For example, other 3 bedders in the area that have sold recently went for about $80k - $110k less than the vendor is asking. At the moment there are properties in the area for sale with an asking price about $80k less. There are more expensive properties on the market but they are more suited to owner occupiers.

To me this looks like a pretty good deal for a first IP as we don't need to do anything and just benefit from the immediate cashflow.

Is $80k - $110k a reasonable premium to pay for the finished product? I'm assuming that buying, renovating the house, getting the approval and building the granny flat etc would end up costing more than $80k - $110k?

Thanks!

j

Hiya

Be wary that its likely you will have vals issues on finance here.

We have had some valuers come back with STOOPID figures.

In some cases I do understandits HARD to get comp sales, esp of approved grannys .

One vals group came back with some sales which were grannies, but NOT approved.

When quizzed the valuer claimed, yes they were council approved...............the BA on this deal took 5 minites to work out that the COMPS the valuers were using were NOT approved grannies.

After going back and asking them to specifically state that their comps were of approved flats, and that we would be taking this issue up with the Valuer principal, lo and behold, they were no longer approved

In any case valuer STILL came back low, and we had to go elsewhere to get the right val.

In closing, I do NOT believe on average that you get a $ for $ benefit on granny build value based on the limited data to hand.

Just about to test another with a freshly built granny on a reval

ta

rolf

 

[RightValue]

Unless its on a seperate title, many valuers class it as just another bedroom/living area, and so will value it as a 4br 2 living property. Which I expect is nowhere near 100k more than a 3br home.

Pretty much that .. plus maybe a bit more.

Never more than depreciated cost unless there is market evidence otherwise.

The fact is that it is still mostly a family home and they are not valued on the basis of cashflow.

 

[JayOh]

Thanks for that - we'll have to wait and see what the valuer comes back with and what the other buyers think it's worth

 

[james_w]

Thanks for that - we'll have to wait and see what the valuer comes back with and what the other buyers think it's worth

Banks are still very picky and valuing at the low end atm.

 

[virgo]

House with granny flat

Hiya

Last year i revalued a house with an approved granny flat in Greystanes...i was worried about lack of comparative houses ...i spoke to the valuer to let her know there was a similar set up 2 streets from mine....

I was surprised when she said "no worries! i have got a FEW houses with granny flats to be able to obtain a comparison!"

So i think it depends on the suburb you are talking about...for Mt Druitt i think there would be quite a few for the bank to compare values on...for other areas/state...there might be a lack of similar set up.

BTW, that was CBA that did a revalue.....and yes, i was happy

 

[colleen_04]

Thanks for that - we'll have to wait and see what the valuer comes back with and what the other buyers think it's worth

Interested to hear how this one pans out.. make sure you let us know the outcome!

By the way - just had a reval on our own home with brand new 2-bed granny flat.. not very happy with valuation, and definitely doesn't cover the cost to build/landscape/fence etc..

I agree with Rolf - the returns are great, but be weary of expecting grand valuations.. just not happening in my experience.

 

[HappyCamper]

I have a house in Western Sydney like you describe. 3 bedroom house at the front, 2 bedroom house at the back. The house at the back is attached and 17 years old. Mine is classified as a dual occupancy rather than a house + granny flat. There is a difference.

Rolf is on the money. There may be issues with finance. There was a bit of a frantic search for finance in the end and I had to go with a major lender and with an 80% LVR.

In terms of valuation, it depends on the area really. Mine would be about $60k more than a house without a granny flat. The median for the area is mid $300's. I am getting an 8% yield.

 

[Rolf Latham]

I have a house in Western Sydney like you describe. 3 bedroom house at the front, 2 bedroom house at the back. The house at the back is attached and 17 years old. Mine is classified as a dual occupancy rather than a house + granny flat. There is a difference.

Rolf is on the money. There may be issues with finance. There was a bit of a frantic search for finance in the end and I had to go with a major lender and with an 80% LVR.

In terms of valuation, it depends on the area really. Mine would be about $60k more than a house without a granny flat. The median for the area is mid $300's. I am getting an 8% yield.

depending on the overall transaction it is possible to get to a 90% blend with a few lenders, one or 2 May go to 95 on an exceptional property and borrower.

When looking at specialised securities like this it's important to know what lenders will do what loan to value ratio to make sure you don't leave yourself out of pocket.

The difference between a 70% loan to value ratio to a 90% loan of a ratio can make a huge difference to your overall portfolio and portfolio growth

TA

Rolf

 

[JayOh]

It looks like someone else has made an offer on the place.. hopefully they can secure the finance!

I might just keep on looking!

Thanks for all the advice - much appreciated!