The Andersons, who already owned an investment property in Brisbane, decided they wanted something with development potential. After much discussion we referred them to a buyer’s agency in Sydney and the process of finding a detached house with enough land to add a second dwelling commenced in earnest.
“We made contact with the Buyers Agency, with the express interest in finding out more about this ‘Granny Flat’ strategy we had heard and read so much about,” said Paul.
The idea of constructing a granny flat in the backyard of an established property appealed to Paul and Katrina, and after speaking with the Buyers Agency, they determined that this was the approach they would use to secure their next asset.
Most appealing was the fact that they could buy a house and enjoy immediate returns by renting it out straight away, and then developing the property without undergoing the potentially lengthy and costly planning approval process. New South Wales legislation allows for another dwelling of up to 60 square metres to be constructed without planning approval, as long as the allotment conforms to certain size and frontage guidelines.
“To date our property investment strategy had been very simple. Buy a house in the best location possible, renovate, rent it out and watch the property increase in value. However, we were in a situation where we wanted to invest in more properties, but were at our limit of affordability,” reasoned Paul.
Confronted with a flat lining real estate market, (Late 2012) they conceded that a more neutrally or positively geared property option was the next logical step to take on their investment journey.
“Building a Granny Flat allowed us that luxury,” said Paul. “The secret was to maximise the capital gain, which meant property selection was foremost.”
“We could have spent the next year researching the Sydney market and driving from Canberra every weekend, attending auctions, doing the due diligence and DIY’ing this strategy, but we decided the risk to reward made this option unpalatable.” said Paul.
Instead, they employed the full services of a reputable Buyers Agent; an investment that paid off when the company found a property that suited the Anderson’s requirements to a tee.
They secured a detached, four-bedroom brick veneer house on a 648 square metre allotment in Sydney’s Doonside for $400,000. After a 12-month search, they took possession of the new property in 2012.
The block’s irregular, triangle composition allowed for construction of the new build right next to the existing dwelling, giving the granny flat the additional benefits of front access and off-street parking.
The Andersons employed a company experienced in the erection of granny flats who managed the entire process and delivered a brand new brick residence designed to complement the existing house, creating a duplex style development.
Construction costs came in at $118,000 for the two-bed unit, which is currently tenanted for $370 per week, in addition to the main residence that fetches $410 per week. This means that Paul and Katrina are sitting pretty with a property that yields excellent returns of around 6 per cent; in an area that has forecast future capital growth in the region of 9 per cent per annum.
“We believe we have the opportunity to develop major capital gains based on the fact that the property is more a dual occupancy, rather than just a Granny Flat out the back. Hopefully in years to come our property will be distinguishable from other Granny Flat developments, making it a more desirable product, and therefore adding equity to our portfolio,” said Paul.
The Andersons intend to hold their latest acquisitions over the long-term, with plans to buy additional properties and eventually invest within their own self managed super fund to ensure they reach their retirement income goals by 2027, when they hope to give up their day jobs and enjoy the fruits of their residential real estate nest egg.
If you would like more information regarding the strategy used by the Andersons and how Trilogy can assist you in financing this type of investment, give our team a call on 1300 657 132 or Click HERE to Schedule Your FREE Consultation.