Real grannyflat figures

[free_dom]

Hello,

I have been looking into buying an IP in western Sydney and having a granny flat in the rear yard for some positive cash flow. Granny flats Australia are advertising from an example that $1000 can be made per month after expenses are taken out. I would like to know what figures people are achieving in western Sydney with granny flats.

 

[travelbug]

OK roughly.

$100K build at 6.5% interest is $6500pa

Rent at $250pw? more in better suburbs of course = $13000 minus $6500 = $6500pa.

minus water, electricity (unless separate meters) agent fees, insurance etc.

But there are cheaper options for building.

 

[LisaParker]

I have not seen $1000 per month positive cash flow from the western suburbs with a Granny Flat addition.

Give them a call and get them to go through their numbers with you. I am guessing they have added 20% cash deposit or something, not included the cost of purchasing and leasing front home etc - ??

Most scenrios I have run end up at about $80per week or less after all costs and depreciation.

 

[Mindmaster]

$80 a week is not bad.

Have 4-5 of these IP's where the combined house and GF have a $10-40 a week positive cash flow, assume
-LVR's of around 80-90%
-rental increases inline with inflaction
-interest constant at 6.4% (a whopper of an assumption I know)

In say 5-10 years time, you'd be well on the way to being able to LOR

 

[Newbieatlife]

I'm putting about $170pw in my pocket after all expenses and not including depreciation

I put down 20% on the house purchase and financed the whole construction from drafting to turnkey (even though I paid a bit up front)


total loan = $406,000 @ 5.79% fixed for 3 years total rent returning $710pw. This is in Blacktown

I would avoid buying in super "cheap" areas like mount druitt and surrounds with the intention for a granny flat build as there is a greater risk of overcapitalisation and far less return to justify it


Go with Brazen http://www.grannyflatapprovals.com.au/ instead of Granny Flats Australia.
He only helped me with drafting back then but now he has his 'turnkey packages' set up which offers turnkey products with no headaches and a smile for a smidge over $90k which I think is great value.

I had the guy from granny flats australia do up a quote for me and it was almost $30k more than what Brazen and some of his then building contacts was quoting me.

 

[free_dom]

Was that 20% of our own cash or was it just from equity?

 

[brazen]

Go with Brazen http://www.grannyflatapprovals.com.au/ instead of Granny Flats Australia.
He only helped me with drafting back then but now he has his 'turnkey packages' set up which offers turnkey products with no headaches and a smile for a smidge over $90k which I think is great value.

I had the guy from granny flats australia do up a quote for me and it was almost $30k more than what Serge and some of his then building contacts was quoting me.

Thanks for the +pve feedback, but just to let others know, we cant always do them for just over 90k. If your site is:
1. Steep (necessitating excessive excavation/retaining walls)
2. Has drainage issues or sewer issues.
3. Requires demolition of structures and concrete slabs + driveways etc
4. Has difficult access for the builder (i.e. no side acccess)
5. Requires a fire-rated wall (rare, but sometimes necessary).

...these things will of course incur additional fees.

But I'm kinda glad that my recent advert "Demand Turn-Key Pricing" is working for people. Too many businesses are banking on people's lack of knowedge.

Cheers.
Serge.

 

[Oscar]

Has anyone become seriously wealthy investing in granny flats??

Think bigger people.

 

[Peter_Tersteeg]

Investing in granny flats won't make you wealthy, neither will purchasing a positive geared property or 3 that clears $50 a week after costs.

What they will do is make holding the asset cost effective, so that when prices go down or sideways, they're not taking money out of your pocket.

The real money is still investing for capital growth over the long term. The gearing (positive or negative) only helps you accumulate more assets.

 

[Rolf Latham]

Investing in granny flats won't make you wealthy, neither will purchasing a positive geared property or 3 that clears $50 a week after costs.

What they will do is make holding the asset cost effective, so that when prices go down or sideways, they're not taking money out of your pocket.

The real money is still investing for capital growth over the long term. The gearing (positive or negative) only helps you accumulate more assets.

The other argument recently offered by posters is that equity used to build a granny can be more effectively used to buy a complete separate dirt and house.

We have done finance for a a number of grannies recently, and they have really become the flavour of season.

Some of my observations

1. Cashflows can be great
2. Rtn on equity invested in terms of cashflow is sensational
3. Rtn on equity invested in terms of organic equity growth is variable, but in general, appears poor right now for a number of reasons.
4. We are talking primarily NSW here since the state gov has muscled the councils into accepting them.
5. Valuations are still all over the shop. Until they become more understood by valuers, AND there is more comparable stock being turned over we will have challenges with getting the initial investment of a granny build back on a dollar for dollar basis.

ta
rolf

 

[Rolf Latham]

Has anyone become seriously wealthy investing in granny flats??

Think bigger people.

I suppose from a GLOBAL perspective Australians are already seriously wealthy

I get what you are saying though, different methodologies will suit diff people.


ta
rolf

 

[brazen]

Has anyone become seriously wealthy investing in granny flats??

Think bigger people.

Think bigger people...hmm..that's helpful. I love it.
What do you suggest? Purchase another property? Good idea.

How about further enhancing the ROI on your existing rental property? Get your tenants to pay off a $90,000 granny flat over 5 years and then reap the entire rental income...
Terrible idea?

 

[devank]

5. Valuations are still all over the shop. Until they become more understood by valuers, AND there is more comparable stock being turned over we will have challenges with getting the initial investment of a granny build back on a dollar for dollar basis.

rolf

This is the major set back. Which banks are good for dual occ.?

 

[Aaron_C]

This is the major set back. Which banks are good for dual occ.?

It's not the bank per se it's the valuer. The bank can have a decent dual occ policy (most do) but then it gets trashed if the val doesn't stack up to make the numbers and leverage worthwhile.

Like I have said earlier, the best approach is to get a lender who will allow you to choose your valuer prior to the finance application to ensure you get the best chance of making it work out.

 

[Ace in the Hole]

Has anyone become seriously wealthy investing in granny flats??

Think bigger people.

Maybe not yet, but probably in 5 years time there will be some.
It might be just the thing needed by some who are just starting out in their investing journey.
Different techniques for different people with different circumstances.
Getting seriously wealthy can be the result of a progression of methods over time, and for some, a granny flat may just be the first step.

 

[devank]

It's not the bank per se it's the valuer. The bank can have a decent dual occ policy (most do) but then it gets trashed if the val doesn't stack up to make the numbers and leverage worthwhile.

I was told that Bankwest and ANZ are not suitable for dual occ. props. Apparently NAB (or homesite?) are better for this sort of GF set ups. Any truth in that?

 

[Rolf Latham]

I was told that Bankwest and ANZ are not suitable for dual occ. props. Apparently NAB (or homesite?) are better for this sort of GF set ups. Any truth in that?

More than ANZ and BWA arent a good fit for higher LVRs.

WBC is another that is quite fickle with what they will do over 80 %. If the properties are attached, they will go to 90 - 95%, detached, 80 %max.

Comm and Homeside will technically both do 90/95.

ta'rolf

 

[geoffw]

I've got good equity but serviceability may be a problem. A granny flat on a propery I already have may therefore help me to get more property.

 

[Mindmaster]

Maybe not yet, but probably in 5 years time there will be some.
It might be just the thing needed by some who are just starting out in their investing journey.
Different techniques for different people with different circumstances.
Getting seriously wealthy can be the result of a progression of methods over time, and for some, a granny flat may just be the first step.

From looking at sales figures, rents and so forth, house and gf combos in western Sydney is not about sacrificing CG for yield. These combos are cases of CG AND yield.

CG - Looking at the last 14 years of sale prices in the cheaper areas i.e. Tregear indicates that CG has been good with average anual growth of at least 12%. If Sydney is going to have good CG, these areas should do well.

The GF will should eventually increase over property value by $1 for every $1 spent so no likely loss there.

Yield - The combo will have yields of 8% or higher with the GF having an individual yield 12% or more. Yields that as Brazen mentioned, will have tenants paying it of for you. These high yields can also be instrumental in allowing you to buy more of the same properties which is a crucual factor for wealth.

 

[Oscar]

Think bigger people...hmm..that's helpful. I love it.
What do you suggest? Purchase another property? Good idea.

How about further enhancing the ROI on your existing rental property? Get your tenants to pay off a $90,000 granny flat over 5 years and then reap the entire rental income...
Terrible idea?

Sounds like a great idea. Let me know how many times you have replicated this and the impact on your investment portfolio.