IP #4 added to my portfolio.

[triton07]

IP #4 added to my portfolio. I’ve been searching 6 months trying to find the right IP & finally found it, only time will tell if I’ve done the right decision.

The IP is a 3bd house (brick veneer) on two lots of land (1250sqm). At this stage the house will need a minor renovation & have it rented out. In five years time, my plan is to build 4 maybe 5 townhouses, rent, refinance & use the equity to repeat same process.

Looks like now I will be posting on forum trying to get some reno tips.



Cheers
George

 

[ziggy2214]

George

congratulations mate, where did you buy?
are you able to share any details?

 

[triton07]

George

congratulations mate, where did you buy?
are you able to share any details?

Thanks ziggy, the IP is in Blacktown, 5 minutes walk to station & westpoint. Purchased price $370k, have I over paid or is it the correct value, I don't know but being a brick veneer house on two lots at 1250sqm with development potentials, I could not resist in putting an offer.

But like I said, time will tell if right decision has been made.


Cheers
George

 

[ziggy2214]

George

It's a nice and central location.
The price for Blacktown could be a little on the high side but due to the large land size, it's proximity to Westfield and the train station you could be sitting on a gold mine there.

Developers are finding it hard to get finance these days so they won't be falling over themselves to buy your block but one day the situation will change and you could easily double your money.

Meanwhile interest rates are comming down so your holding costs are low but you are still going to be out of pocket by an x amount.
I am thinking that you should try to find a way to increase your rental yield.

Can you add a granny flat or 2 on the land?
There are demountable buildings you can buy 2nd hand
I don't know if you need council permission for bringing in temporary buildings.
Check it out

 

[tigerGT]

Thats a great idea and something I have also looked into. Those demountable granny flats are quite slick! The only issue is council approval but that aside they are an excellent way to improve yields. Is it a corner block? If so you could also have seperate access for the two properties.
.
Good luck

 

[triton07]

George

It's a nice and central location.
The price for Blacktown could be a little on the high side but due to the large land size, it's proximity to Westfield and the train station you could be sitting on a gold mine there.

Developers are finding it hard to get finance these days so they won't be falling over themselves to buy your block but one day the situation will change and you could easily double your money.

Meanwhile interest rates are comming down so your holding costs are low but you are still going to be out of pocket by an x amount.
I am thinking that you should try to find a way to increase your rental yield.

Can you add a granny flat or 2 on the land?
There are demountable buildings you can buy 2nd hand
I don't know if you need council permission for bringing in temporary buildings.
Check it out

I don't think that there should be any issues with council in adding a granny flat or even another building & yes will need council approval, but at this stage I don’t think it's worth going ahead with this method since I will be in the plan for a townhouses development in the next 5 years.


The money being spent in putting another house could be used for paying the DA cost, that's my thought anyway but your right if I'm in a need for more yield, but at this stage with my other IP's being CF+ I should be able to hold out for the next 5 years.

George

 

[triton07]

Thats a great idea and something I have also looked into. Those demountable granny flats are quite slick! The only issue is council approval but that aside they are an excellent way to improve yields. Is it a corner block? If so you could also have seperate access for the two properties.
.
Good luck

Nah, its not a coner block but house is on one side of lot & lots of side area if needed for driveway to rear of block.

How much do these demountable granny flats cost?

 

[ziggy2214]

How much do these demountable granny flats cost?

New ones can cost up to $50K (or more) but you can pick them up 2nd hand from ebay for less than $10K.

Below is a link on ebay for one but there will be others you just need to keep looking.

Also, due to the tight rental market in Sydney the state government has relaxed the rules on granny flats so provided you have the space it should not be hard to get approval for 1 or 2 portable buildings in your back yard.

You just need to provide some external toilet/bath facilities

http://cgi.ebay.com.au/12M-X-3M-SIT...ryZ11752QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

 

[BayView]

IP #4 added to my portfolio. I’ve been searching 6 months trying to find the right IP & finally found it, only time will tell if I’ve done the right decision.

The IP is a 3bd house (brick veneer) on two lots of land (1250sqm). At this stage the house will need a minor renovation & have it rented out. In five years time, my plan is to build 4 maybe 5 townhouses, rent, refinance & use the equity to repeat same process.

Looks like now I will be posting on forum trying to get some reno tips.



Cheers
George

Well done Triton!

I hope it is a roaring success!

 

[Jacque]

Congrats George

It sounds as though you've done sufficient DD to know a bargain when it came along. Let me know if you need to know a good PM in the area as I know a few myself. I consider that part of town pretty good value right now- even more so with lower consumer sentiment affecting buyers. Good stuff

 

[triton07]

Thanks all, only time will tell if I've correctly done my DD search.

Jacque, it would be great if you could pass me the PM details. Thanks!


George

 

[MichaelW]

New ones can cost up to $50K (or more) but you can pick them up 2nd hand from ebay for less than $10K.

Or there's always this sort of option too, which is what I'm considering throwing in the backyard of my PPOR...

http://www.paal.com.au/kit-homes/studio-1.asp

Cheers,
Michael

 

[Viewburn]

Michael,

Do you have any other links or info on this sort of option?
I like this idea as a pretty cheap option that should have good rental return.
I will have to have a talk to the council as to how they view this option. I am guessing they will treat it as a 2nd dwelling and need to comply with that.

Or there's always this sort of option too, which is what I'm considering throwing in the backyard of my PPOR...

http://www.paal.com.au/kit-homes/studio-1.asp

Cheers,
Michael

 

[MichaelW]

Michael,

Do you have any other links or info on this sort of option?
I like this idea as a pretty cheap option that should have good rental return.
I will have to have a talk to the council as to how they view this option. I am guessing they will treat it as a 2nd dwelling and need to comply with that.

Hi Viewburn,

The other mob I linked were:

http://www.ozkithomes.com.au/

And for all the Paal options just link from their home page here:

http://www.paal.com.au/default.asp

I also understand that the NSW State Government is moving to change the legistlation around auxiliary dwellings so they can ease the rental squeeze. I know my local council is looking at implementing mods to their development controls to allow auxiliary dwellings to 60m2 footprint given some site coverage limitations. They understand that they need these sorts of options to cater for the lower price point tennants.

My personal preference is this particular design:

http://www.paal.com.au/kit-homes/blaxland-2.asp

The under roof area is 88m2, but the actual internal footprint is only 63m2 (9.2m x 7.2m)

Cheers,
Michael

 

[ziggy2214]

My personal preference is this particular design:

http://www.paal.com.au/kit-homes/blaxland-2.asp

The under roof area is 88m2, but the actual internal footprint is only 63m2 (9.2m x 7.2m)

Cheers,
Michael

Michael,
If you buy this kit home with a $44K loan @ 7% it will be costing you $59/week. The rent depending on the suburb will be 3-6 times this amount
so it's an option worth considering and more so in your area where the rents are higher.
cheers

 

[MichaelW]

Michael,
If you buy this kit home with a $44K loan @ 7% it will be costing you $59/week. The rent depending on the suburb will be 3-6 times this amount
so it's an option worth considering and more so in your area where the rents are higher.
cheers

Spot on Ziggy!

Precisely why I am considering it. But, to be fair, the total cost to construct and connect utilities would probably be around $100K allowing for the need for a certified sparky and plumber etc. But even so, $100K and the land is free, and no additional land tax etc then it would rent out for about $350-$400pw in my area.

Seems like a good cash flow improver... Only question is whether it would add $100K to the value of my property which I'm not sure it would. In which case some of that $100K is dead investment (negative equity) so you need to think carefully before doing this sort of thing if you're thinking about liquidating the asset.

Cheers,
Michael

 

[ziggy2214]

Only question is whether it would add $100K to the value of my property which I'm not sure it would. In which case some of that $100K is dead investment (negative equity) so you need to think carefully before doing this sort of thing if you're thinking about liquidating the asset.
Cheers,
Michael

Good point so if you intend to develop the site in the near future it probably won't be a good investment. But if you intend to keep the place for 10 years or more it could be a worthwhile exercise

 

[Perp]

Congratulations, George!

Just a couple of sticky-beak questions... 1) Does current zoning allow the construction of 4/5 townhouses? 2) If no, do you have reason to believe that this will change? 3) In either case, why are you planning to do this in 5 years, in particular?

 

[triton07]

Congratulations, George!

Just a couple of sticky-beak questions... 1) Does current zoning allow the construction of 4/5 townhouses? 2) If no, do you have reason to believe that this will change? 3) In either case, why are you planning to do this in 5 years, in particular?

Thanks Tracey,

1) Does current zoning allow the construction of 4/5 townhouses?

Have met with a local town planer & says not a problem for 4 townhouses, for a 5th townhouse it is possible but not at this stage (explained on your next question).


2) If no, do you have reason to believe that this will change?

Yes, from what I’ve been told, rezoning is in process for the upcoming years, will see how it turns out.


3) In either case, why are you planning to do this in 5 years, in particular?

The 5 year plan is wife will be going back to her fulltime job & better off with cash flow.



Cheers
George.

 

[Perp]

Sounds like a ripper, George, well done. So the cashflow improving in 5 years - is that necessary to fund the loan for townhouse construction, or because you want to hold all 5 after construction and they may be negatively geared?

If it's the former, and you want to build sooner other than because of affordability issues, I should think if you plan to sell one or more off that you should be able to access gross realisation funding, ie development funding on the basis of the end value. Given that the lender's primary assurance of being paid is the end value, your income generally bears little relevance to being approved; it's more about whether there's profit in the deal.

Sorry if I'm telling you to suck eggs.