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 73: Bad builders: how this investor bounced back
Episode 72: Policy changes to interest-only loans: what buyers need to know
Episode 71: How this 'stubborn' investor recognised a property lemon
Episode 70: How this investor complements each property and balances his portfolio
Episode 69: Are you a ‘lazy’ investor? Consider the benefits to working with a financial team
Episode 68: Special episode: audience discussion live from the Property Buyer Expo
Episode 67: Don’t get ‘caught up in the now’: an expert reveals his tips for success
Episode 66: Wealth distribution: how should you manage your money?
Episode 65: Real estate agents: what separates the good from the bad?
Episode 64: How this investor learned from a property blunder
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