What to do with dodgy second building on residential block.

Hoping for some advice here and after reading the thread on granny flats its got me thinking.

We bought a house a few months ago that is on a corner block and is within the councils "urban core zoning" which basically allows a much higher density than other zones. The block is I think around the 650 sqm mark - too small to be subdivided into 2 blocks, but we found out if we build on it and provide the neccessary outdoor space and Off street parking, it can be seperated into 2 titles. But it would be very tight to do this. As it is this zoning, it could possibly have 3 to maybe 4 town houses on it in the future, but the house is a bit too good to rip down and I dont have the money to develop to that extent yet.

When we bought it, it had a standard 3 bed 60 year old house on it and at the rear, an old seoperate garage, extended and converted into a granny flat with a power meter at the box in the front house. The conversion was applied for with a DA in about 2000 but never got the inspections or signed off and it would have lapsed by now. When we bought it, the owner was trying to get the council to revive the old DA application so he could get it passed but gave up when he accepted our offer. Apparently the council agreed in principle as long as the new requirements were met such as water tanks etc.

The work done to it is a bit dodgy and would need some rectifying to bring it up to scratch. This would probably cost about 12K without any council fees etc. If rented out in a good condition it would turn our portfolio from 3 IP's (neutral to slightly positive with depreciation) to 4 IP's and about 7K positive cash flow. Should rent for around $250 p/w. Trouble with this is I'm a bit scared if the council came anywhere near it, it may be classed as unauthorised development. I was thinking maybe I could get a building certifier to look at it to see if it would be passed by council and maybe a town planner?

Other options we have thought of is tearing this down and starting from scratch. Quotes to demolish are around 10k and a comparable size building would cost about 65k for all materials (labour + council fees extra). That would put us back to a neutal geared position.

Our intentions are to keep the whole property but I was thinking that if the two buildings were strata titled, it would increase the value and give us more equity for another purchase. But would paying out to get it strata titled necessarily make it worth more considering we have no intention to sell.

At the moment we can't afford to build a new building but I need to start going down whichever path I choose for this property.

We haven't made any hard and fast decisions on this building as I need to get info on all our options and make an informed decision.

So these are our options.

1. leave it as is and not do anything.

2. Try to get it approved and passed by the relevant authorities as a granny flat.

3. Demolish and build new.

Comments? Ideas?:confused:
why? how does seperate titeling get more rent?
I see it as the prospective tennent sees the building as is , they don't say things like , its not on its own tittle so i will pay less, ???
i think you first need to try and find a clever maintenence/builder to make it look (not so dodgy) and rent it out as its full potential,
why? how does seperate titeling get more rent?
I see it as the prospective tennent sees the building as is , they don't say things like , its not on its own tittle so i will pay less, ???
i think you first need to try and find a clever maintenence/builder to make it look (not so dodgy) and rent it out as its full potential,

I mustn't have been very clear, I was talking about the value of the properties being worth more on two seperate titles. The rent would be the same regardless. I just thought that maybe on two titles, they would be worth more than one.
there may be other options - have you checked with council that you cannot subdivide this block?

usually a corner block is allowed and extra 30% (ie, block can be 30% smaller) because of independent street access etc.

or alternatively you can subidivde using a "dashed" strata plan. this is relatively new but is basically means that all buildings are drawn on the strata plan in dashed lines for subdivision submission and that the owners of each building is not responsible for anything to do with the other buildings - they are only responsible for share amenities such as the fence (which you are under torrens anyhow), sewer and water (if they cross each others boundary).

we had one of these dashed plans done recently and passed council no problems.
I did check with the council some time back (the help desk, Newcastle Council) and was told the standard size was I think around 850 sm to be able to subdivide without building first. There was no mention of a corner block being different, I suppose it depends who you talk to at the council. I have gotten different answers at different times when asking the same questions there.

The dashed strata is very interesting to know, but I don't quite see where it is different from a normal strata setup.

Methinks I should engage the services of a town planner and inspector.

Next time I go shopping for an IP, I will really be looking with different eyes, no longer will I buy just a plain old Ip that doesn't have any extra twists to it.

Gee this forum is fantastic. I've learnt more here than I have from numerous books and seminars (some of them just a day long selling session and a waste of my time).

Thanks everyone!
now you have me confused.

with ncc there is:

district centre - 140m2 for 2 beds - 200m2 for 3+ beds (no 30% increase for corner)

neighbourhood centre - 200m2 for 2 beds - 285m2 for 3+ beds (no 30% increase)

standard res - 330m2 for 2 beds - 450m2 for 3+ beds (30% increase allowed)

there must be a minimum courtyard area of 35m2, which must include a space of 4x4m.

sounds like you need to talk to the duty officer at length.

with the dashed strata plan - it differs from a normal strata as, with normal strata, the body corporate is responsible for all building externals and land (the owner is only responsible for the internals) ... with a dashed plan the owner is responsible for all the externals as well - there is no body corporate. only really works with two (or more) completely separate buildings.

this means there is no "subdivision limit" as long as the property complies with all other criteria - such as parking, courtyards, footprint etc.

i've put a lot thru ncc council over the years and found them pretty good to deal with in regards to residential.
Hi Lizzie,

Thanks for your post.

Where can I find out more about this 'dashed strata plan'? Can't seem to find anything on Google about it.

your conveyancer and surveyor should know all about them. they have only been in, in nsw, around 12 months or so.

Thanks for the help everyone.

An update

Got the granny flat checked out. All above board:D

I had a carpenter look at it to get some idea about the structural integrity of it and in his opinion apart from one wall it is OK. The one wall that isn't he said isn't as bad as what it looks and can be easily fixed.:)

So who hooo. Last Friday I was busy making plans in my head what to do and cost to fix it up. Have already been told I could get $250/week for it when renoed.

Then life throws us a curved ball to scuttle our plans and challenge our moral fiber...........................

Sunday the in laws come over as previously aranged to look after our daughter for a couple of hours while we sort out a few things at the IP in question. They are very unhappy living with hubbies sister and family (have 2 rooms +bathroom/laundry downstairs in SIL's rented house and contribute $100/week towards rent). They are being treated terribly by my SIL.

They want to get out on their own but they cant really afford it.
Background is they are 64 and 61 and have just emigrated here about 3 months ago from the UK on a elderly parents visa. FIL broke his back at about 35 years old and has been an invalid pensioner ever since. He is not far off being in a wheel chair. All of their family is here.

They had a house they sold (because they were going to come to Australia) and put the money into a term deposit with a bank in the UK and the bank went bust and they lost all of the money.

All they have is 60K AUD and they will get the UK pension in July next year. They arnt eligible for a commision house or susidised rent in Australia so if they go out on their own they will be paying market rent for the rest of their lives which will probably take up most of their pension (which I think will be frozen at 2010 rates for the rest of their lives).

MIL asks have we decided what to do with the granny flat. We had offered it to them months ago but they had turned it down- not good enough.

I think MIL has finally worked out that their choices are limited.

Hubbie and I go to the IP and on the 40 minute drive discuss what to do. Do we ignore subtle plee for help, fix up granny flat and rent out or do we do the right thing and offer it to them? Hubbie is really P***d off that his sister wont help financially and really resents the financial burden being placed on us. But............. they are his parents and we have worked out that they cant afford to stay here in Australia without financial help. So in 4 years time when their 60K would have been spent on rent we will have to start helping out to the tune of about $150/week... at least.

So we come up with a compromise. They pay to fix it up, and pay the council rates for the whole property of about 2K per year and they can live there as long as they want.

Financially long term we miss out big time but short term, they have paid to fix it up (we would have to wait a couple of years till we could afford it) and we get the increased equity now.

It does mean we will never be able to sell it, but we wearn't planning on selling anyway.

Now all I have to do is find out the taxation implications of doing this, which is probably the topic of another thread.

So thanks for the help (especially Lizzie - now I am armed with the knowledge about dashed plans, I can go forth and prosper with more knowledge under my belt):D