Tuan Duong Principal at Duo Tax recently caught up with project builder Daniel Simone from Simone Homes based in Sydney. Below is his insight on how to make the most out of various new-build type properties on a block of land.
Everyone wants to get more out of what they already have. So as an investor, how do you get more out of your current properties you are about to purchase? This is a question I get asked a lot and there are many different ways to go out about and each one will be unique from one investor to another. Below are four beneficial options that you could use to further develop your property.
- If you have a low budget, minimal room or space behind your home, a granny flat can be an excellent choice. Granny flats cannot be larger than 60 sqm, and if your block is larger than 450 square metres, it is definitely worth looking into. A granny flat can cost anywhere from $120,000 – $150,000 and can get in rent in Sydney from $350 – $500 per week. A reasonable yield after interest on a construction loan is factored in. It is currently the preferred option for today’s investors as it provides an immediate stream of income on a property that is already owned.
House and Granny Flat
- If you are leaning towards a development but cannot fit or afford a Duplex, or you are just building your own home and want to have a rental on the same property then a house and granny flat is right for you. A house and granny flat can be contracted as either attached or detached. Detached costs slightly more, but it comes down to the size of your block, if it is a corner lot then having detached works really well if you also plan to live there. A house (double story) and granny flat will start around $380,000 and you would expected to get a minimum combined rent of $800 per week depending, of course, on the area built. Definitely worthwhile chatting to your lender to see if the numbers stack up from a gearing standpoint. (Read more about gearing here).
- The main benefits with these types of development is you will have two dwellings that if needed, can be sold independently of each other. The option of renting one and living in the other is very popular. What is best for you really comes down to land size and position. In regards to budget, building two separate homes will cost a significant amount more starting around $650,000, a duplex around $600,000. However, the government has attempted to limit duplex developments by increasing the cost of insurance for builders and it is said that it will only continue to increase, almost tripling the prices over a year ago. So, if you are thinking about building a duplex then act fast. The merits are certainly there.
- Now we start getting into the bigger types of development and by that I mean Multi Dwelling (3 or more). From a rental management position, it is certainly more cost-effective having a combined property management agreement. When it comes to these type of developments, the most important elements to consider are the size of the block, frontage and zoning. With a larger block, contacting the council will give you an indication on what type of development is available on the lot. Responses from Councils can be vague so it’s a good idea to have the right team that includes builders, architects and town planners who can ‘read between the lines’ in regards to council requirements.
3 questions Daniel reckons you should ask yourself:
- What can be done on you block, are there any size or zoning restrictions?
- What are the potential costs of development?
- What is my budget and potential return?
Crucially, brand new properties have some major advantaes that should not be overlooked:
- High yield
- High depreciation
- Lower vacancies
These 3 advantages combined set-out to help you maximise your cash-flow (read more about cash-flow). Ultimately giving you the benefit of accelerating your financial position to make your next property purchase sooner or perhaps your next holiday…
Brand new properties are not for everyone, but if it seems to fit your criteria, let us know and we can connect you with Daniel from Simone Homes to learn more.