IP with Granny flat

[stinadaze]

Hi again guys! i keep coming back and asking questions cause I've found your help to be great!

my question this time is this..... is it really easy to rent out a house and the granny flat on the same land separately? are there special "rules" i need to check about before I purchase a property like this to make sure the 2 dwellings can be rented out separately? is there really demand for such a thing.....I mean I don’t think id want to live in a granny flat who can i check with re demand for such a thing?? Real estate agents?

thanks again!

 

[josko]

Hi there, welcome back!

Easy is probably not a word I would use and a certain amount of "calculation" is involved. However, I have never found it hard.

I have rented out a main house with grannyflat attached on several occassions. I currently let out an attached dwelling to my own home.

You do need to think about the people you let to and whether they will be happy co-inhabiting in close proximity.

For example, should you let the main house to a family with small children they would probably not be too happy with some young Gen Y's partying out the back every Sat night.

You need to find two lots of people who you think would be responsible and particularly mindful that they are sharing common yards etc.

I have found single guys, especially separated or divorced over 35's to be fantastic in granny flats.

I hope this helps.

Regards JO

 

[Propertunity]

is there really demand for such a thing.....I mean I don’t think id want to live in a granny flat

Beware thinking that a prospect tenant will think like you do

There is a huge demand for granny flats:
1. Unfortunately, 50% of marriages fail and that leaves divorced (now single) men and women in their 40's and 50's needing a place to live. (I know JO seems to like 'em younger at 35 ) They can afford it - but often the divorce wipes them out financially
2. Young couples starting out their "live together" life
3. Pensioners who want a bit of yard to potter around in and don't like living in unit blocks.

You do need to put extra effort into tenant selection as JO says. We find the older women and men - grannies and grandpas are often the best in g/flats.

 

[stinadaze]

Thanks to you both!

good points to think about for sure.

so would you suggest i approach a RE agent to ask about demand for such dwellings? or a Property manager?

Cheers!

 

[Propertunity]

so would you suggest i approach a RE agent to ask about demand for such dwellings? or a Property manager?

Talk to a PM about rental demand in your area. The REA will only be able to tell you about sales demand.

 

[HappyCamper]

I hope you don't mind me piggybacking on your thread.

If it were a detached granny flat, would there be much value in putting in fencing so that the main house and granny flat are completely separated?

 

[Propertunity]

If it were a detached granny flat, would there be much value in putting in fencing so that the main house and granny flat are completely separated?

Yes, the more 'separate' you can make it the better. Rear or side lane access is even better.

 

[forumite]

Beware thinking that a prospect tenant will think like you do

There is a huge demand for granny flats:
1. Unfortunately, 50% of marriages fail and that leaves divorced (now single) men and women in their 40's and 50's needing a place to live. (I know JO seems to like 'em younger at 35 ) They can afford it - but often the divorce wipes them out financially

Reminds me of the following interesting article. I think it is classic.
http://www.smh.com.au/opinion/politics/just-an-ordinary-joe-20091009-gpjm.html

THE story of how Brendan Nelson came to live in Joe Hockey's garage says a lot about the big man. It was mid-1997, Nelson's marriage had fallen apart and he was broke paying child support. He asked Hockey if he could move from the room he rented in the house to the shed to save cash.

Hockey not only agreed — he began to take an active interest in Nelson's welfare. Calls were made to Nelson's old mates asking them to keep an eye on him.

When Hockey went overseas, he brought back new running shoes for Nelson to give to his own children, and refused payment for them. And the next year — when Hockey was promoted by John Howard and Nelson wasn't — Hockey asked his dad to go around and check that his mate was OK.

 

[stinadaze]

Interesting article

I'll be more cheecky now and ask how in the world do i find a property manager? yellow pages came back with only 3 results for my area (Campbelltown/Camden) which is hard to beleive! all of them being well known RE agents! when i went to their site there was nothing about Property management! i must not be looking in the right places!

 

[darcy13]

Hi All

I'm hopeing to build 3 this year (on IP's) , my main concerns are,

1- current tennats aren't going to be to happy about it, so they may leave and have to get new one's

2- as mentioned above tennant selection is critical , they need to be of a match ( not much good having a granny in the granny flat and teenagers renting the house )

3- fencing the off the grannyflat so they have some yard to themselves

4- priviacy for both tennants (seperate entrances if poss ) (have issues with this one myself )

In NSW grannyflats have preapproval , so its a 10 day approval process I believe

again in NSW I believe there is a demand ( or I'm hopeing there is, I should say)

But its the path Im about to take with my IP's and if there are anymore I will do the same

Heres hopeing
stuart

 

[Perp]

Be aware that in most (all?) Councils it's a requirement for the land to be zoned for multi-unit dwelling in order for it to be legal to rent out the house and granny flat separately. It would be illegal to do so in most standard low-density residential neighbourhoods.

Separately from the issue as to whether you're allowed to rent out the two buildings separately, you'd have to ensure that the granny flat is up to building code as a "habitable dwelling". There are various requirements on the building in order for it to be a habitable dwelling, such as amenities provided. Even if a tenant's happy to not have a kitchen, for example, and only eat take-aways, if the building's not classified as a "habitable dwelling", it's illegal to rent it out.

I'm sure there are people who do it illegally (not josko I'm sure ), but you need to be aware that doing so would probably negate both your home and landlord's insurance.

I know of what I speak, because I had a "studio"-type apartment at the rear of my student accommodation which I spent at least $10K renovating a few years ago. I'd naively assumed that because it had been rented out previously, that it was "kosher". As I was finishing, the neighbours complained and the Council visited and told me I couldn't rent out the room. That was bad enough news, but what really burned me is that the reason the neighbours knew it was illegal was because they had owned the property previously, and they were the ones who illegally converted the shed in the first place, and they'd rented it out illegally for years.

(The same neighbours complained that one of my windows was illegal - because they'd put it in without permission! - and it cost me $15K in architects fees, plans, and applications to get it made legal following their complaint. Then they wonder why I'm not sympathetic when they ring me at 3am and tell me that my tenants are making noise! )

 

[Perp]

1- current tennats aren't going to be to happy about it, so they may leave and have to get new one's

If you have an existing tenancy agreement, I don't think you could build a granny flat for the duration of their tenancy, as you've rented them the entire title, not just the house. I don't think you could force them to give up a part of their occupancy (ie the land that you plan to put a granny flat on) without their agreement.

In NSW grannyflats have preapproval , so its a 10 day approval process I believe

Just because you're allowed to build one, doesn't mean you're allowed to rent it out separately to the house - that's a separate issue. The primary intent of a granny flat is for extra living space for a member of your extended family, such as a teenager or granny (hence the name "granny flat" ). Being permitted to rent it out to a separate family unit to the main dwelling would generally not be permitted unless the land is zoned for multiple occupancy.

 

[neK]

Wow i had no idea that was the case.

Because im considering building a granny flat too and would like to rent them out separately as well because that way i could get more rent.

The granny flat and the existing house would each have their own street frontage (2nd frontage is a proper street, not a laneway) and would be fenced off accordingly and it would not be possible for anyone to tell just by looking at it.

This would suck if I wasnt allowed to rent this out separately, because from what ive been reading I thought it was legal the whole time.

 

[darcy13]

There have been some new laws introduced in NSW because of the housing shortage for grannyflats and alike

1 being that the land has to be over 450m2 ( I did have a copy of what was needed ,lost somewhere now ) other than that it was pretty straight forward from what I can remember, as the NSW govenment has taken a lot of the councils powers away so they don't step inbetween landlords and getting more accomadation on the ground as fast as possible.

If you have an existing tenancy agreement, I don't think you could build a granny flat for the duration of their tenancy, as you've rented them the entire title, not just the house. I don't think you could force them to give up a part of their occupancy (ie the land that you plan to put a granny flat on) without their agreement.


I guess they will have to leave in a timely fashion


Just because you're allowed to build one, doesn't mean you're allowed to rent it out separately to the house - that's a separate issue. The primary intent of a granny flat is for extra living space for a member of your extended family, such as a teenager or granny (hence the name "granny flat" ). Being permitted to rent it out to a separate family unit to the main dwelling would generally not be permitted unless the land is zoned for multiple occupancy.


I think this is part of where the state govenment steps in, they have changed a few laws and land needs to be 450m2 ( state govenment is in a heap of do do here and I think there doing as much as they can to prevent what is about to happen happening to them anyway )


Be aware that in most (all?) Councils it's a requirement for the land to be zoned for multi-unit dwelling in order for it to be legal to rent out the house and granny flat separately. It would be illegal to do so in most standard low-density residential neighbourhoods.


They are now if over 450m2 again state govenment thing

Separately from the issue as to whether you're allowed to rent out the two buildings separately, you'd have to ensure that the granny flat is up to building code as a "habitable dwelling". There are various requirements on the building in order for it to be a habitable dwelling, such as amenities provided. Even if a tenant's happy to not have a kitchen, for example, and only eat take-aways, if the building's not classified as a "habitable dwelling", it's illegal to rent it out.


will be built by building company ( will have there own power and water meter)

I must say you handled your neighbour thing way better than I would have , I would have been on 'Australia's most wanted' if it had been me ( mainly cause it should be legal to shoot people who do those kind of things to you ) !!!

Stuart

 

[Perp]

My reading of the NSW changes is that yes, you can automatically build a granny flat (within the guidelines) - which is definitely a boon. Go NSW!

But I'm still wondering whether you're allowed to rent out the two buildings separately...

My understanding is that a homeowner, for example, could rent out their granny flat to somebody else - one lease.

Or the primary tenant could sub-let the granny flat for the duration of their own lease, if they don't need to use it. Again - one lease over the property, with a subordinate sub-lease.

But I can't specifically see it written anywhere that the ability to build a granny flat automatically over-rides previous provisions preventing more than one lease agreement being offered over a single title. It may be permissible, I'm just saying I can't see it confirmed anywhere. None the case studies are about allowing a landlord to have two leases on one residential title. My reading is that the benefit for landlords is that somebody may pay more to rent a property with a granny flat, either because they want to use the granny flat themselves and will pay more for it, or because they anticipate an income from sub-letting the granny flat.

Has anybody seen it written anywhere explicitly that two separate leases is now permissible as-of-right in NSW?

 

[neK]

So has anyone who is in NSW successfully rented out both primary house + granny flat to different people legally?

 

[Perp]

I must say you handled your neighbour thing way better than I would have , I would have been on 'Australia's most wanted' if it had been me ( mainly cause it should be legal to shoot people who do those kind of things to you ) !!!

Let's just say that they're not on my Christmas card list.

I was recently invited to provide input on a DA that they lodged, wanting to extend their PPOR. I was somewhat tempted to try and find something to object about - preferably something expensive to address - but the part of me that thought that would be petty, and bad karma, won out.

 

[wylie]

I was recently invited to provide input on a DA that they lodged, wanting to extend their PPOR. I was somewhat tempted to try and find something to object about - preferably something expensive to address - but the part of me that thought that would be petty, and bad karma, won out.

Do the neighbours know that you know that they dobbed you in over something they had been doing illegally for years? And do they know that it cost you a lot of money to fix THEIR illegal window?

Here is a little snippet from an email from the neighbours of one of our IPs, in relation to their request for half the cost of a $5000 fence that they desired when they built in their back yard, when we ended up agreeing only to paying half of a $2000 fence......

"I understand you plan to do some construction as well in the near future and I’m sure we as neighbours will be having a say in this. I would like to think we can move forward sensibly .......blah, blah, blah."

(We actually didn't legally have to pay ANYTHING because they totally ignored the fencing act, ripped out the fence without asking, half built the new very expensive one whilst trampling our gardens, making a mess and wandering all over our yard without asking - and our legal advice was to pay NOTHING - but we were prepared to pay half of what we would have agreed to had they asked nicely.)

If that little snippet is not some type of blackmail, I'll eat my hat. They can object all they like, but objections don't mean squat if the plan is within the guidelines and council is happy with it. Neighbours objected to their plans, but they got it through without issue.

I take my hat off to you ozperp for being the "better man". Personally, I would be tempted to reduce the rent for the student tenants ONLY if they promised to make as much noise as possible .

 

[Propertunity]

My reading of the NSW changes is that yes, you can automatically build a granny flat (within the guidelines) - which is definitely a boon. Go NSW!
But I'm still wondering whether you're allowed to rent out the two buildings separately...

Hi Tracey,

It is another "Go NSW!" on the rental front.

The legislation referred to is here:
http://www.planning.nsw.gov.au/plansforaction/pdf/Affordable Housing_Fact_Granny Flats.pdf

In the governments own document above they say:
“We aim to help mums and dads create a place for those who need a space of their own, like elderly parents or those generation Y children who haven’t yet left home. These secondary dwellings also give families the chance to use a Granny Flat as a source of additional income in these challenging economic times.”

Get with the program

 

[Player]

Can two separate leases be in place

Thanks for that link Prop.

Still unclear (to me at least) if the entire holding (original dwelling and granny flat) can be IP's.

The way I read it, as an OO in the original house/dwelling the granny flat can be used for ancillary income over and above personal use for elderly or adult children, however I am unsure if once the original home is no longer a PPOR can the two dwellings be rented separately on separate leases?

Also if a property is income producing in the first instance, can the two lease (two separate tenant) scenario that I've mentioned above be achieved?

Any ideas or firm info.......

Way around it I guess is to have a head lease and sublet especially if in a uni precinct.

Any ideas or links would be appreciated