All Topics / Creative Investing / Build another one out the back…

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of grimnargrimnar
    Join Date: 2010
    Post Count: 86

    Anyone here ever build a second house on the back of their block and leave it on the same title?

    (i.e. a dual occupancy, not subdivided or strata titled).

    Positives I can see are:

    1. only paying for the land once;

    2. only paying for stamp duty once;

    3. One lot of rates;

    4. two lots of rent; and

    5. two lots of depreciation.

    Downsides I can see are:

    1. limited market to sell to (only really appeals to investors who will want it for a discount, and few 'owner occupiers');

    2. difficult to value;

    3. eggs in one basket. i.e. a flood could really mess with your chi.

    4. some difficulties with council and building approvals (trying to fit a house on the block, for example, with enough driveway and open space, etc.)

    There are more pluses and minuses of course, but these are the key issues I feel.

    Anyway, if you have done something like this before, how did it work out for you? Anything to watch for?

    Profile photo of mrhetmrhet
    Join Date: 2012
    Post Count: 2


    Yeah, I looked into doing that, but with the costs you have to still spend to do the development say $20,000 – $30,000 to go through Council town planning, it is a lot of money for you to carry unless it has some value on it as an investment.

    Banks don't place any value on it until it is at building contract stage .  Then once its' built you will have capital gains tax issues on the new one or the old one depending in which one you move into.   I think you will find it is more complicated than

    it seems, unless the values in your area are good, rentals are in high demand there and you get good rental returns. 


    Profile photo of CatalystCatalyst
    Join Date: 2008
    Post Count: 1,404

    Granny flats are the buzz at the moment. It's the same thing as you're describing. Separate building, not subdivided.

    And lots of them aren't small either (60sq).

    Not too hard for approval these days. As long as there is still yard left I don't think it would limit resale really. Not difficult to value either, But it won't be double what it is with one house. Usually it's just increased by the cost of the build (but sometimes less).

    Profile photo of jmsracheljmsrachel
    Join Date: 2012
    Post Count: 711

    I haven’t seen much granny flats being built in Victoria. Is there a reason behind this or just one of those things?

    Profile photo of M.InvestigatorM.Investigator
    Join Date: 2012
    Post Count: 134

    I think a good way to figure out whether to move forward, and whether it's a good investment for you is to use an excel spreadsheet, and type out all the expenses and costs to develop the granny flat on one column and add them up.

    Then look around at other granny flats renting out in your neighbourhood, or you could even ask a local property manager, and figure out what granny flats are renting for. Then I suppose you could figure out the potential yield you'd get. If the yield is worth it, then go for it. If not, then I'd suggest investing in something else.

    For me personally, I like investing in properties that already have the granny flat included.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Join Date: 2009
    Post Count: 2,539
    jmsrachel wrote:
    I haven't seen much granny flats being built in Victoria. Is there a reason behind this or just one of those things?

    It's because the councils in VIC are not so speedy on approving such things as they are in NSW. 

    I am not 100% sure but I think I heard somewhere that a granny flat in VIC can only be for housing a dependant person (such as a granny), and when the person no longer needs to be housed, the granny flat has to be removed.

    Jacqui Middleton | Middleton Buyers Advocates
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of christianbchristianb
    Join Date: 2009
    Post Count: 386

    It's possible to build a second dwelling on an allotment, and not subdivide the land. Be aware however, that most municipalities will rate both properties anyway, especially if the services are connected and/or metered separately.

    In Victoria a "granny flat" is to be constructed only for the purposes of housing a dependent person. There are rules around construction type, size, location and set-backs to consider. Of course, when that dependent person no longer requires the granny flat it may end up either unused or rented out. Technically, I believe this is a breach of one law or another, but it seems to happen.

    If the second dwelling is not a granny flat, then a planning permit will be required. Generally speaking I think the benefits of subdividing outweigh the pitfalls. Notably, two properties, on separate titles, are more valuable than one. There is also the benefit of being able to sell one if necessary or desirable.

    As an aside, one strategy I have seen work well is this:

    An investor purchases land with a dwelling that is in good condition.

    They then build a second dwelling behind the existing dwelling.

    Because depreciation benefits are greater for the new dwelling, the old one is sold.

    Proceeds from sale are then used to reduce debt and a cash flow positive investment property results.

    Profile photo of worldinvestorworldinvestor
    Join Date: 2011
    Post Count: 297

    I only build at rear for cashflow though there is most certainly equity in the deal, for example my total cost to build etc at rear today will be approximately $180K and rent will be approximately $420 pw for rear property.

    If you find suitable site and repeat this a number of times there is no need to sell therefore building a portfolio which is cashflow positive.

    Granny flat scenario has its negatives as many are trying to sell properties with granny flats at over inflated prices, also if you build a granny flat it is very difficult to access equity.

    Cheers WI

    Profile photo of grimnargrimnar
    Join Date: 2010
    Post Count: 86

    Thanks all for your comments, that's great feedback. A few things I did not realise, like the council charging twice for rates even on the same title… so that is definitely something to investigate further!

    For a bit of background on my specific situation: 

    My PPOR was a bit of a rundown Queenslander in Ipswich QLD (about 40 mins west of Brisbane).

    It's in a great spot close to transport and shops, above the floodline, and zoned for units. The plan was always to keep it long term as a rental while we moved on to the next one. Then 'maybe' in 10-15 years time sell the house off for removal and redevelop the site into units…. but that seems less and less likely to ever appear on the radar, being 3 years into it now without even finishing the renovations!

    The main reason I am considering this over a full subdivision, is that we only have limited access down the side boundaries. The maximum distance between the house and the side boundary is 3m on one side, and the eaves overshoot that by 500mm.

    Plus, the council contributions and fees for a subdivision in our area, as well as the negative impact it would have on the existing house value, would quickly wipe out any profits above our existing equity… i.e. robbing peter to pay paul.

    If we can get around the driveway width issue, then building a new house out the back should create even more cashflow and deductions.

    … I guess I see it as an opportunity to use my available land to build my second investment property for considerably cheaper than it would cost me to build the same house on any other land in the area, but with the added benefit that it will rent for the same amount or slight discount.

    Profile photo of nurse1nurse1
    Join Date: 2010
    Post Count: 21

    In Vic the Granny flats that are only for dependent persons are the ones owned by DHS or old  Ministry of Housing

    They supply them and charge the person 25 % of their income and remove the unit when the person no  longer  lives in it

    It is a means of providing subsidized housing  to those on pensions/low income etc

    Home owners can pay for their own private granny flats/bungalows to be built  and it has nothing to do with DHS as they own it

    and anyone they like can live in it. Some people get them built for teenagers grandparents etc  rather than extend

    Profile photo of RPIRPI
    Join Date: 2012
    Post Count: 308

    Sorry you are out of luck in QLD in most circumstances.  If you can get it through as a duplex you are OK.  However, granny flat, dual living etc. comes under the category of multi-unit dwelling the minute you rent out to separate parties.

    There are some councils in QLD that have a specific allowance as a get around, Ipswich is not one of them.  Granny flats are called auxiliary units and must be used to house family members.

    My planning firm is doing 3 different duplex approvals in Ipswich at the moment.  The Council is pretty good with them.

    My law firm is dealing with the fall out of over 30 enforcement notices for dual living at the present (not ICC)  Expensive, messy  and heart breaking if you are relying on the added income.  

    Depending on the way you structured it, there may be a way to utilise it to increase the rent, but If I was you I would seek written approval from an authorised representative of the council, their Town planner for example.  This must not be some general advice, it needs to be specific to the land.


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    Property Lawyer & Town Planner

    Profile photo of SeanWilsonSeanWilson
    Join Date: 2013
    Post Count: 26

    We are actually doing annexed unit developments in Logan City Council. They have no limit on unit size, and the house and unit can be rented to two separate families on the one title! We have been working with LCC for ages and our rentals are a minimum of $200/week positively geared.

    We have around 4 we own at the moment, and our latest one is actually an executive style home in Tanah Merah with 4 bedrooms, and an 'annexed unit' (but really it is a house) behind. 

    If you want, PM me and we can get chatting, but dual living is a council by council issue. This is because it comes under the 'planning code' of each council rather than the 'building code' which is Australia wide.

    The only issue at the moment is securing a loan from the bank (since the banks are pretty tight these days) a 20% deposit is recommended.

    Check out for more info.

    Profile photo of fredo_4305fredo_4305
    Join Date: 2009
    Post Count: 336

    Ipswich are very stringent on subdivisions and very expensive for the location. Knowing Ipswich very very well it would be unlikely to make any money off the deal if you were to sell the rear property. Im not sure if they would approve it with the eaves distance from the boundary. They may consider "what may happen in the future" ie future owners may want to subdivide or strata but can't. Im not sure how they would also look at the size of the block and number of dwellings along with how they would calculate the acutal building block as the hatchet needs to be taken away m2 wise most of the time.  ie if your total block on a normal subdiv is 550m with the driveway being 50m2 the building area is 500m2. 

    Im guessing from your description your prob in the Eastern or Northern Suburbs of Ipswich. Im not sure if there would even be cash flow in it. It would have to cost you high 100s or low 200s to build something decent, what would it rent for close to 300s? It also has to take some value away from the front house.

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