Western Sydney House + Granny Flat
- Thread starter Dualitii
- Start date
Assuming you want to rent the two out separately, check whether the granny flat is approved *as a second dwelling*. The gf building might have council approval, but as a garage. It many not be up to standards to be used as a dual occ. Do not ask the agent or vendor, go to council and get it in writing.
Check whether there are two water meters and two electricity meters. If there aren't separate meters then charging the gf tenant for power and water becomes difficult to impossible.
Also check the possible rent return yourself using comparable properties in the area. Do not rely on the accuracy of information from anybody other than yourself or people you have paid to find out on your behalf. (Not that other people lie, just that they are likely to err on the side then benefits them not you.)
Check whether there are two water meters and two electricity meters. If there aren't separate meters then charging the gf tenant for power and water becomes difficult to impossible.
Also check the possible rent return yourself using comparable properties in the area. Do not rely on the accuracy of information from anybody other than yourself or people you have paid to find out on your behalf. (Not that other people lie, just that they are likely to err on the side then benefits them not you.)
Great points by Vaughan.
If anything, I think this is much better than the other OTP you were looking at!
Noting that, I had the option of buying in Fairfield 2 years ago. Didnt like it and went for Brisbane instead. Since then, prices have gone up 15% in Fairfield and haven't moved all that much in Brissy...
So any advice I say about Fairfield should be taken with a grain of salt...
If anything, I think this is much better than the other OTP you were looking at!
Noting that, I had the option of buying in Fairfield 2 years ago. Didnt like it and went for Brisbane instead. Since then, prices have gone up 15% in Fairfield and haven't moved all that much in Brissy...
So any advice I say about Fairfield should be taken with a grain of salt...
Great post Vaughan - particularly that last comment. Some agents tend to exaggerate the anticipated yield when there's a GF involved.
I'm not usually a big fan of buying renovated properties as there's little scope to add value and you pay a premium (usually - not always).
Having said that, is their a lease for both in place at the moment?
Cheers
Jamie
main road locn
at least 2 things that I can see
1. Smarty Pants valuer hitting your val with a 5 for environmental issues, noise being one, air quality being another ...........usually more an issue if you are looking to borrow > 80 %, OR are with a weeny lender who has little risl tolerance
2. Tennants may not like the fact of the traffic on the main road.
The place will always have a lower price than sorounding quiet stock, but should ( in theory) rise with it
ta
rolf
at least 2 things that I can see
1. Smarty Pants valuer hitting your val with a 5 for environmental issues, noise being one, air quality being another ...........usually more an issue if you are looking to borrow > 80 %, OR are with a weeny lender who has little risl tolerance
2. Tennants may not like the fact of the traffic on the main road.
The place will always have a lower price than sorounding quiet stock, but should ( in theory) rise with it
ta
rolf
Thanks for your replies and points made - the REA has advertised it as a council approved granny flat, and I know it was previously a garage but couldn't negotiate any lower price despite mentioning that (as well as RP data). I guess with the places being renovated it helps us because I'm fairly time poor and at least this will for the moment be cash flow positive.
No there aren't tenants at present, but I do know there has been properties on the same road a few hundred metres away rented out. I also asked for a rental guarantee for 650/week and got it for 12 months, so there's that... the rea is confident they can get that so I may use them as my property manager.
I've asked them to check whether the place is dual metered.
Will also go to the council first thing tomorrow morning to confirm the granny flat situation.
Planning to go with st George who can do 90% on multiple dwellings, will this be a valuation issue?
Pretty excited I must say
No there aren't tenants at present, but I do know there has been properties on the same road a few hundred metres away rented out. I also asked for a rental guarantee for 650/week and got it for 12 months, so there's that... the rea is confident they can get that so I may use them as my property manager.
I've asked them to check whether the place is dual metered.
Will also go to the council first thing tomorrow morning to confirm the granny flat situation.
Planning to go with st George who can do 90% on multiple dwellings, will this be a valuation issue?
Pretty excited I must say
Rental guarantee? No such thing. They are telling you what you want to hear.
The REA can give you a *rental appraisal* which is their estimate of rental, but it's no guarantee, and it has no legal standing.
Don't get the REA to check for dual meters: THEY WORK FOR THE VENDOR an they are not qualified to look for meters or anything like that. You need to do this yourself, or get somebody else like a building inspector, but make sure they they know how to check for dual meters and you need to instruct them in writing.
You need to take responsibility for this.
They're putting in the 12month rental guarantee into the contract guaranteed by the vendor (REA asked them after I asked). Would my solicitor be able to advise whether the guarantee is watertight and has legal standing?
I will specifically mention the dual meters to the building inspector, I wouldn't feel confident identifying it myself. I'll go along with the inspector to learn how to look for it anyway.
I will specifically mention the dual meters to the building inspector, I wouldn't feel confident identifying it myself. I'll go along with the inspector to learn how to look for it anyway.
I don't think you are ready for a purchase.... OTP to this.
Rather just buy a house + land with potential, land with an upside.
I don't see ANY upside with this transaction!
And how can you rely on a rental guarantee?? You don't need a rental guarantee for an established property - a good property will rent itself out! How does this guarantee help you? Clearly they are desperate to sell - even in this market.
Seriously, reconsider this! The right deal will come. Don't settle for the first property you come across!
Update: granny flat was council approved as a granny flat, went directly to the council.
The rental guarantee wasn't offered, it was given after I requested for one.
I'm confused, where's the downside? This place is positively geared from the start, there aren't many landed properties that are. The gross land value is roughly analogous to what I've seen cleared at the auctions and on the market. If land is what appreciates then this has it, maybe not massive but still has the same potential of land at 600-700sqm, because now if these size blocks of land can used for duplex development. The granny flat is already built so I don't have to wait for who knows how long to build a granny flat on another property. The main place recently renovated so once again can be immediately rented out. On other properties I'd have to purchase the place, spruce it up for renters or build the granny flat, all the while paying the mortgage at $500/week.
Let's say this: if I had a choice between this property @ $550k, versus the same property except unrenovated and without a granny flat for $500k, which should I take and why?
Edit: sorry to add to a long reply, but isn't this better than an equivalent $550k unit with $650/week rent? Which, I might add, is not easy in Sydney either.
The rental guarantee wasn't offered, it was given after I requested for one.
I'm confused, where's the downside? This place is positively geared from the start, there aren't many landed properties that are. The gross land value is roughly analogous to what I've seen cleared at the auctions and on the market. If land is what appreciates then this has it, maybe not massive but still has the same potential of land at 600-700sqm, because now if these size blocks of land can used for duplex development. The granny flat is already built so I don't have to wait for who knows how long to build a granny flat on another property. The main place recently renovated so once again can be immediately rented out. On other properties I'd have to purchase the place, spruce it up for renters or build the granny flat, all the while paying the mortgage at $500/week.
Let's say this: if I had a choice between this property @ $550k, versus the same property except unrenovated and without a granny flat for $500k, which should I take and why?
Edit: sorry to add to a long reply, but isn't this better than an equivalent $550k unit with $650/week rent? Which, I might add, is not easy in Sydney either.
The "main road" position is the main drawback.
There will always be a discount because of this and less people interested in purchasing it.
The same setup a block or two back from the main road would be worth more.
You just need to make sure you are getting a good discount for the main road position.
There will always be a discount because of this and less people interested in purchasing it.
The same setup a block or two back from the main road would be worth more.
You just need to make sure you are getting a good discount for the main road position.
Only you can answer this question.
If its a great deal, buy it.
If you have your doubts, question those doubts individually.
If those doubts still remain afterwards and can't be overcome, don't but it.
If you're waiting for people to say "YES YOU SHOULD BUY IT" then you'll buy nothing. Everyone has their own opinion. Without seeing details, everything is generalised.
However if you post the link, remember its a public forum and someone might take what you've posted (research and all), and buy it while you're still mulling over it.
Bottom Line: Only you can answer this question.
Hi Dualiti
I can't comment on the address, price or likely rental position without inspecting or knowing more about the property however it sounds like you're doing your DD just fine so far.
1. You've found out GF is council approved so big tick here. Much easier to rest easy with this especially in regards to insurance. The overwhelming majority of GFs in these areas don't have approval so consider this a big bonus.
2. YES attend with the inspector to cover off questions including separate meters. Also check for other likely problems in houses of this era including broken/cracked asbestos, sinking pier issues, waterproofing etc.
3. Biggest downside to these type of purchases is bank valuation. Even with a fully approved GF comps can be hard to find and, as Rolf has pointed out (and believe me he knows what he's talking about here) position may affect val here, especially if borrowing more than 80%. If you feel it's unfair, start collecting true comps (the selling agent should help you here) and contest the valuation. Your broker will be able to assist here.
4. The rental return is something that can be pretty easily substantiated by yourself with a little research. What are similar houses and GFs renting for in the area? Even forgetting the guarantee by the vendor (which is akin to a cash payment really over and above true rent if applicable) you need to be sure that you can rent out both dwellings for $650 per week. If so, it sounds pretty positive to me.
Best of luck moving forward and keep us posted
At least you're out there and taking action, unlike a lot of passive "investors" who are yet to make a move in building up their asset base!!!
Yeah, I've taken into account the main road position, just wanted to know if there was anything else I needed to be concerned about. Monalisa in particular seems to be stating quite emphatically that this is a property to avoid.
The rental market is there for at least $630 based on the lowest rents on RP data I could find around the area.
At any rate I don't think anyone is going to leap at this property after what's been posted - don't think it's hard to identify this property without any direct link. It's been on the market 6 weeks, vendor has been very stubborn about offers, and my building and pest report has a few concerning things that need rectifying.
E.g. granny flat is not dual metered, so need another 1.5k to budget into installing one. Some roof tiles need replacing to avoid water leaks, etc. Already communicated all of that to the vendor though, just waiting for their replies. Also waiting on the official bank Val next week. This is far from over...
The rental market is there for at least $630 based on the lowest rents on RP data I could find around the area.
At any rate I don't think anyone is going to leap at this property after what's been posted - don't think it's hard to identify this property without any direct link. It's been on the market 6 weeks, vendor has been very stubborn about offers, and my building and pest report has a few concerning things that need rectifying.
E.g. granny flat is not dual metered, so need another 1.5k to budget into installing one. Some roof tiles need replacing to avoid water leaks, etc. Already communicated all of that to the vendor though, just waiting for their replies. Also waiting on the official bank Val next week. This is far from over...
If the property meets your long term goals, if you can get suitable finance, if the val stacks up, if the gf is approved, your rent estimates are solid and you are happy with the main road then its time for a contract. In many cases a house plus gf in Syd will be better cash-flow performance than the alternatives you listed. You will never get consensus here. Thats the beauty of this place.
I think given the way Sydney market has gone, I think buying a land with a granny flat on it is not that attractive as it would have been 18 months to two years ago as the yields were higher.
I personally would buy land which has future development potential. At least there would be an upside.
Without having done the numbers, I am guessing a property such as one you are considering may be neutral to slightly positive. You would already be paying extra due to the dual occupancy factor.
If this cannot sell in a hot market, would you be able to offload it quick if you wanted to for whatever reason? Good properties will always sell - regardless of the market.
Having said this, you have to question how much negative gearing you are able to sustain if you bought something with a house alone?
At the very least, I would buy in a quieter street and not on the main road.
Lastly..... ALWAYS follow your intuition. No matter who says what on here, as knightm said, you have to be comfortable with the purchase. If you have doubts about this property (or a nagging feeling of some sort), you know subconsciously that this is not the one.
Good luck!
I personally would buy land which has future development potential. At least there would be an upside.
Without having done the numbers, I am guessing a property such as one you are considering may be neutral to slightly positive. You would already be paying extra due to the dual occupancy factor.
If this cannot sell in a hot market, would you be able to offload it quick if you wanted to for whatever reason? Good properties will always sell - regardless of the market.
Having said this, you have to question how much negative gearing you are able to sustain if you bought something with a house alone?
At the very least, I would buy in a quieter street and not on the main road.
Lastly..... ALWAYS follow your intuition. No matter who says what on here, as knightm said, you have to be comfortable with the purchase. If you have doubts about this property (or a nagging feeling of some sort), you know subconsciously that this is not the one.
Good luck!
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How do you calculate this property to be positive? Have you considered ongoing fees like management fees, insurance and rates and what do you allow for maintenance and vacancy?? Although it is a good return, if you are buying with the thought it will make you money instead of costing you money (short term) I think you need to look at your figures again. Do you expect there to be a positive capital gain over the next 5 years or so? If not it could turn out to be a bit of a drain and affect future investment potential in terms of borrowing capacity due to poor bank valuations.
It's not a bad return at all, but with value adding done by the seller (Reno plus flat) is there any left for you to make? Might not be the right timing to buy and hold this type of property but depends on your circumstances.
Excellent point!!!
