To purchase investment property and add granny flat?

A

andini

Hi everyone, I've been reading these forums for ages and decided to join. Here goes my first post.

I purchased a property near Parramatta in 2008 for $490, since then it's gone up a fair bit and is most likely valued at approximately $850-$900 seeing as though it's a site suitable for a duplex. Which I plan on developing in the next year or two.

Since 2008, I haven't made any new acquisitions even though I have approximately $300k equity. I look from time to time to see if I find anything suitable.
I've found an ex social housing home that is a little run down for auction which will probably sell between $650-$700k. My idea is to purchase, spend about $10k to put the existing house on the rental market, then spend up to $100k on a granny flat in the yard. I've checked out the current rental market and it seems as though I'll be able to rent the house for $450 and the flat for $400, totalling $850 a week.

I currently have no savings at all and no deposit, I'll be borrowing 100% of the loan. I spoke with CBA over the phone and they said they could lend me up to $715k.

My question is, how would I set up the loan, and does the project sound feasible?
 
Hiya

You'd need to access equity in your current property to fund the deposit/costs on the next.

After settlement - you could arrange an "on completion" val against the new IP which takes into account the future valuation with the intended GF.

The bank will then lend against that value.

Cheers

Jamie
 
It does not add up all that well from a cash flow perspective.

You will finish up spending $850K to get $850 per week in rent.

You will not be adding much value either - probably would be worth $850K at the end.

The granny flat really only works out where it turns a reaonable yield into a good yield.

If your are going to buy a house for $700K that needs some work to only give you $450 per week in rent - then you want to be very confident that there are some big increases in value in the future.

In Mt Druitt / St Marys you should still be able to do a similar project for $250K less.
 
andini said:
Hi everyone, I've been reading these forums for ages and decided to join. Here goes my first post.

I purchased a property near Parramatta in 2008 for $490, since then it's gone up a fair bit and is most likely valued at approximately $850-$900 seeing as though it's a site suitable for a duplex. Which I plan on developing in the next year or two.

Since 2008, I haven't made any new acquisitions even though I have approximately $300k equity. I look from time to time to see if I find anything suitable.
I've found an ex social housing home that is a little run down for auction which will probably sell between $650-$700k. My idea is to purchase, spend about $10k to put the existing house on the rental market, then spend up to $100k on a granny flat in the yard. I've checked out the current rental market and it seems as though I'll be able to rent the house for $450 and the flat for $400, totalling $850 a week.

I currently have no savings at all and no deposit, I'll be borrowing 100% of the loan. I spoke with CBA over the phone and they said they could lend me up to $715k.

My question is, how would I set up the loan, and does the project sound feasible?
Click to expand...

IMHO this sounds like one big mess with no real goal/direction/point/benefit.

With the equity you have, there are 101 other options I would seek before I ever thought up that mashogana plan.
 
Thanks for the advice guys, much appreciated. I needed your perspective on this and I'm glad I asked, I won't be pursuing it any further. I was after capital gains as houses in the area are selling minimum $780-$800k.

I currently don't have a proper plan in place, but I'm after capital gains and want to hold properties. Being a carpenter and licensed builder, I do have the skills to renovate or build.
What would you recommend with $300k equity?
I have also been looking into purchasing an IP in western sydney near the new Marsden Park development, either st Marys or Rooty hill.

Thanks
 
andini said:
Thanks for the advice guys, much appreciated. I needed your perspective on this and I'm glad I asked, I won't be pursuing it any further. I was after capital gains as houses in the area are selling minimum $780-$800k.

I currently don't have a proper plan in place, but I'm after capital gains and want to hold properties. Being a carpenter and licensed builder, I do have the skills to renovate or build.
What would you recommend with $300k equity?
I have also been looking into purchasing an IP in western sydney near the new Marsden Park development, either st Marys or Rooty hill.

Thanks
Click to expand...

I beg you..can you please take some time to read some books, ask more questions on here, workout your goals, formulate a strategy etc..if your really serious about wanting to create some wealth then this is what you need to do first.

First please please please read some books.

please
 
andini said:
... I'm after capital gains and want to hold properties...
Click to expand...

You're buying at the TOP of the market, and you haven't indicated that you plan to add value through renovation or development so the only way you'll make money is for the market to move up all by itself.

How long are you expecting to hold until the next big period of capital growth occurs?
 
Rolf Latham said:
my recommendation would be "the slight edge" by Jeff Olsen.

Zip to do with real estate or investing, but everything to do mind set

ta
rolf
Click to expand...

Thumbs up.


Also anything Jim Rohn is priceless. Youtube has many good videos on him. Les Brown too.

In therms of property books.. depends how serious you are. if so so, then 3 books? if really serious, then 10-15.


I guarantee you, after reading 10 books, your thoughts on your original post will change dramatically:


"I've found an ex social housing home that is a little run down for auction which will probably sell between $650-$700k. My idea is to purchase, spend about $10k to put the existing house on the rental market, then spend up to $100k on a granny flat in the yard. I've checked out the current rental market and it seems as though I'll be able to rent the house for $450 and the flat for $400, totalling $850 a week.

I currently have no savings at all and no deposit, I'll be borrowing 100% of the loan. I spoke with CBA over the phone and they said they could lend me up to $715k."

My question is, how would I set up the loan, and does the project sound feasible"
"
 

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LeoT said:
IMHO this sounds like one big mess with no real goal/direction/point/benefit.

With the equity you have, there are 101 other options I would seek before I ever thought up that mashogana plan.
Click to expand...

Don't know what you're on about. It's a great idea to buy and build a granny flat. You just need to find a property that is suitable for it. That particular example by the op is not great but it's better than alot of other people are doing.

I'm building a granny flat at the moment in Sydney. I purchased the property in 2009 for $280k rented it out as is $330 per week. Not great it's negative but the block I chose was perfect for a granny flat. It was 30m wide and 17 deep. Weird but great for the creative investor. I fully renovated the property at beginning of this yr and converted from a 2 bedder to a 3 bedder. I had planned this before purchasing. I fenced up half the block and rented the renovated house without parking/driveway for $420 per week. Building a granny flat ($130k) on the other half and expect on completion will rent out for $450-$480 per week.

Total cost $480k

Total rent $880 p/w

Not bad hey? :)
 
For all intents and purposes, granny flats don't cost $100k.
Think $130k all costs included.

Yes you can find guys that do full brick veneer 80sqm granny flats for $80k. I've had somersoft peeps take me out to see them, they were super excited, I wasn't so much taken by the price but by how the walls slanted like the great pyramids of Giza.
 
andini said:
Can you recommend me the first book I should read?
Click to expand...

A great one I recommend is a Peter Span book How to build a $10m property portfolio. It's very easy to understand and gives you the basic ideas regarding property investing so you can use to formulate your strategy. Combined with 'Rich dad poor dad' and you should be ok :)

Reading books are great but without action it's not going to do you any good.
 
nhg said:
For all intents and purposes, granny flats don't cost $100k.
Think $130k all costs included.

Yes you can find guys that do full brick veneer 80sqm granny flats for $80k. I've had somersoft peeps take me out to see them, they were super excited, I wasn't so much taken by the price but by how the walls slanted like the great pyramids of Giza.
Click to expand...

Yep mine is more like $140k after landscaping etc I'm building 80sqm.
 
james55 said:
Don't know what you're on about. It's a great idea to buy and build a granny flat. You just need to find a property that is suitable for it. That particular example by the op is not great but it's better than alot of other people are doing.

I'm building a granny flat at the moment in Sydney. I purchased the property in 2009 for $280k rented it out as is $330 per week. Not great it's negative but the block I chose was perfect for a granny flat. It was 30m wide and 17 deep. Weird but great for the creative investor. I fully renovated the property at beginning of this yr and converted from a 2 bedder to a 3 bedder. I had planned this before purchasing. I fenced up half the block and rented the renovated house without parking/driveway for $420 per week. Building a granny flat ($130k) on the other half and expect on completion will rent out for $450-$480 per week.

Total cost $480k

Total rent $880 p/w

Not bad hey? :)
Click to expand...

Did I say granny flats are a bad idea per se?

I said his idea in that particular scenario was nuts.
 
james55 said:
A great one I recommend is a Peter Span book How to build a $10m property portfolio. It's very easy to understand and gives you the basic ideas regarding property investing so you can use to formulate your strategy. Combined with 'Rich dad poor dad' and you should be ok :)

Reading books are great but without action it's not going to do you any good.
Click to expand...

Agree, At some point you gotta pull the trigger and go all in.

Moranbah here I come :D
 
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