podcast

The pitfalls of building a granny flat

The pitfalls of building a granny flat
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Simon Pressley - Propertyology

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I think there's an epidemic brewing at the moment with investing in granny flats in Australia. There are a number of local governments throughout the country who've changed zoning to allow people to buy house blocks and then build a granny flat on them and it's a scheme that concerns me. There are a number of so-called property consultants who are out there who are promoting the dual income nature of the property. We all want a property with a good rental return, myself included, but at the end of the day we're going to make our most money when it comes time to selling that property. And the trouble with a granny flat is what fits Propertyology's definition of a 'specialised asset' and when you've got a specialised asset it only appeals to a very small segment of the market. If you have a think about who would actually buy a granny flat - and certainly there'll be some investor or so who'll consider that for the dual income, but have a think about the owner occupier. And 75% of residential properties in Australia are owned by the owner-occupier, not the investor. So straight away, 75% of potential buyers will not consider a property because it's got a granny flat on it. Then there's all sorts of issues for those who do buy the granny flat. Yes - there's two income streams however, not a lot of tenants actually want to live in a property with a strange living in their own backyard. So the original 3 bedroom house, for example, that might have been renting for $400 a week will all of a sudden be reduced to about $350 a week and you might be vacant for about two months before you find the willing tenant. You then get all sorts of complaints between the two tenants amongst themselves. They just don't get along. So there's a lot of things that really concern me about granny flat invests and I personally would never do it.

Listen to other instalments of The Smart Property Investment Show:
Episode 53: Six properties in two years: how this investor is achieving his goals
Episode 52: Will property prices fall? When? And by how much? What investors need to know
Episode 51: SPECIAL EPISODE: SPI team reveals all the financial details of its portfolio
Episode 50: 8 properties by 25: Former housing commission kid reveals how he changed his life and created wealth
Episode 49: How to build a sophisticated multi-property portfolio
Episode 48: ‘From just $2,000 in my pocket to 6 properties’
Episode 47: The SPI Show answers more listener questions: Special episode
Episode 46: 4 properties by 24 – how to build a portfolio without sacrificing fun, travel or food
Episode 45: Special guest Mark Bouris on what really makes property prices rise and when to invest
Episode 44: ‘11 properties by 31, now I’m stuck: What’s next?’
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