Propertunity response to this article which appeared on http://www.realestate.com.au/news/the-ugly-truth-behind-homeowners-growing-obsession-with-granny-flats
Tim McIntyre: Before you start staking out your yard, you should make sure a granny flat will suit your situation, because once it’s built, both buildings are on the one title and can’t be sold separately.
Propertunity: That’s true.
Tim McIntyre: This means far less potential buyers when you want to sell….
Propertunity: Potential buyers are investors seeking high yield (traditionally 30% of the market) and owner occupiers who:
1. Have a daughter / son returning to live at home after a failed relationship (possibly with a baby in tow)
2. Have elderly parents who want to live separately but need to be nearby in case of health or other issues
3. Want to run a small business from a separate home office
4. Want some additional income from renting out the granny flat
It is not for everyone, but there are plenty of potential buyers.
Tim McIntyre: …… and the chance that your property’s value will actually decrease over time.
Propertunity: Seriously? When has a property’s value actually decreased over time? Is this guy for real?
Tim McIntyre: If your street or suburb is full of people with the same idea as you, there is the danger that a glut of granny flats will emerge and resemble an odd-looking shanty town
Propertunity: Maybe, BUT:
1. I have not seen whole streets with the same idea about anything, let alone building granny flats in everyone’s backyard.
2. Modern day granny flats (has the writer seen any of them?) actually can look better that the existing house, hardly a “shanty town”.
Tim McIntyre: In that case, the value of the entire postcode will be negatively affected.
Propertunity: Where has this ever happened? Housing commission properties can do this. Some streets in almost every suburb can have a reputation for almost anything.
Tim McIntyre: Think also of the rental demand. Is there enough of a shortage of rental properties in your suburb to make tenants willing to live in another family’s back yard?
Propertunity: Rental demand for granny flats comes from tenants who would otherwise rent a unit in a high-rise. Many tenants are glad to be paying an equivalent rent as a unit but living with a yard and some garden to tend.
Tim McIntyre: Remember, granny flats often attract transitional tenants — that is, people looking for affordable property on a temporary basis.
Propertunity: That is just false. In my own personal experience, granny flat tenants are long term (many longer term than the house tenants).
Tim McIntyre: Granny flats don’t usually attract long term tenants and therefore, you will need to be prepared for high tenant turnover and extended periods where the flat is not earning an income stream.
Propertunity: That is just false. In my own personal experience, granny flat tenants are long term (many longer term than the house tenants). My granny flat tenants are typically:
1. Grannies and grandpas who have downsized from the family home
2. Middle-aged men or women whose finances have been adversely affected by a relationship breakdown and cannot afford to buy a property in the area where they have lived long term and do not want to leave
3. Widows and widowers
4. Couples just starting out together
Tim McIntyre: Of the different options available, a granny flat investment is probably best suited to an owner occupier with enough space on their block to construct a comfortable second building.
Propertunity: That is just false. It certainly does suit owner occupiers with enough land on but it also suits long term investors who like / need above average rental yields.
Tim McIntyre: And it needs to be in an area with high demand for rental properties.
Propertunity: This is true of ALL investment property purchases, surely?
Tim McIntyre: Being close to an educational institution like a university might also be beneficial, as a high number of students in the area will add to the demand for affordable, no-hassle rentals.
Propertunity: Untrue! Student accommodation, in my opinion, is the last thing you’d want your granny flat used for. They suffer high wear & tear and only Property Managers (PM’s) who specialise in this area want to take on students, as they are high maintenance. PM’s fees are much higher than standard residential leases to reflect this.
Tim McIntyre: If you are an investor, in some suburbs it can actually be cheaper to buy two separate properties than it is to buy one and build a granny flat.
Propertunity: One granny flat can cost $100K to build. What suburbs would you be able to buy a separate house on land for this??? (The back of no-where perhaps?)
Tim McIntyre: Doing this will bring you two rental incomes and much more potential for capital growth in the long term.
Propertunity: This is utter non-sense. There is limited “potential for capital growth” in the middle of no-where, rather than in high sales and rental demand more metro areas.
Does the writer, Tim McIntyre, actually own any real estate himself? Most of his statements seem to indicate (to me) that he has no idea what he is talking about. Too much Christmas cheer perhaps? I can’t imagine anyone sober coming up with this drivel.
OK, why don’t I stop beating around the bush and just say what I really mean?