How this Sydney Property Owner made an extra $500K PLUS an increase in weekly rental income by $330
A Good example for you of not getting the right advice is about a client that we completed a build for about six months ago.
He had a block of land with an existing house on the front and a bit of room on the block. It was a corner block. He wanted to develop it as an investment. Originally he was thinking of putting a granny flat on the back as an extra source as rental income.
The house in the front was set back so far and it was fronting a main road, he incorrectly figured he didn’t have a lot of room in the back so thought he’d just get away with a granny flat.
He went and got some consultations from granny flat builders.
He asked the question ‘do you think I can get anything else on here?’ and obviously their answer was, ‘No, a granny flat is all you’re going to fit on this block.’
They’re not going to tell you that you can build another house on it because they only build granny flats.
It just so happens that we’ve done commercial work for this guy.
So he gave me a call outta the blue and said, ‘look, this is what I’ve got, what’re your thoughts?’
I spent a bit of time and I looked at it. Yes, it was tight, but because it was a corner block, the potential then opened right up.
He went from being restricted to a two bedroom granny flat, which is only a couple hundred bucks a week rental return, with no real major return on the entire development, to a two story, four bedroom home, with a study, single garage, ensuite, walk-in robe, beautiful big home, which basically doubled the value of his land.
He renovated the one in the front, made that all nice and pretty, then we built a nice, two story home on the back for a total of $400K of development costs. When it was complete he got valuations of $800K and over. Just for that new house that we built.
We strata titled them. He’s renting them both out. The new one that we built is getting $680 a week, compared to $350 a week for a granny flat.
And, obviously, the fact that now he’s got two houses on there, the house at the back alone doubled. So, it’s worth $800,000 on its own?
The house at the back is worth $800K if he was to sell it tomorrow, and it cost him $400,000 to do the development. So he’s doubled his money just on that one house alone.
Obviously he had the existing land for some time, and he’s renovated the house on the front
To think he might have just put a granny flat on, and, got a couple hundred bucks a week rent, without any real capital growth to the property is scary when you look at the results he got by coming to us and building with us.
He may have maybe added $200K to the overall value with a granny flat. Ultimately it would’ve just been a single house with a granny flat. Now, because we’re thinking outside the box, and because we knew what we were looking at as far as what we can and can’t fit, he’s just made a fortune out of that site.
So we’re now doing another one for him, and he’s already bought another one.
This client has gone from a $250,000 return to… A $600,000, $700,000 return, for a $400,000 investment.
Really, if people are thinking about putting a granny flat on their properties, it’s worthwhile having a conversation with us because they could turn $200K into $600K, just by having a chat to see what’s possible.
We’ll have a look at the block, make sure that it’s doable.
Comparing it to spending $150K on a granny flat (granny flats still aren’t as cheap as what they used to be). Granny flat costs have gone up. On a two-bedroom granny flat, by the time you do all your connection fees, and all your bits and pieces and signing costs, you’re still going spend $150K on something that’s ultimately never gonna get up in value. So you’re not gonna make that money back. And if you look at $350 a week rent, how long is it going to take you to get a return on that $150K investment?
The other thing is, now that he’s done that development with us and has our support, knowledge and guidance in the background he is free to go out and look for other similar blocks that he can buy and just keep repeating the process. He is well and truly setting himself up for a wealthy retirement.
This client sends me a text message, once in awhile, or an email, ‘saying, I’m looking at this site, what’s your thoughts?’ I’ll spend 10 or 20 minutes researching to local regulations.
I’ll give him a bit of a snapshot of what we can and can’t do. And that gives him a good indication of whether he should buy it or not.
Not only are we a builder, we are your support team and our clients can always come back for us to do a bit of duediligence for them BEFORE they even lay out any money on something. We know straight up, nope, don’t touch that block, keep looking for another one if there is something wrong with it.
We’ve got another client now which we’re in the process of building an attached, side by side, dual occupancy for.
That’s scheduled to be finished in February. He’s now contacted me last week about a development site that he’s been looking at, for four townhouses. Same thing. Sent me along the contract, ‘this is what I’m thinking about doing, what do you think?’
This one was DA approved which was a big advantage. I could give him an idea of what the development costs would be. Then we could add that to, obviously, the purchase price.
We could do a quick feasibility, and can say, ultimately you’re going to make X amount of dollars on this development. So, it’s worth your while or not worth your while.
We do all that for free, because, of course, he’s already a client.
I did the same thing for him when I first met him with the site that he bought. So we did the initial consult and quick feasibility for him for FREE.
That’s our process, even for our one-off builds. Even if you’re coming to us and you want to just build a house on a block of land, we still follow the same process. We still do the same things. We still communicate the same. We treat you as if you’re part of the team. You’re not just a builder vs client, you’re now a part of us, and we work with you through the process.
We look at how we can save you money.
Make you money.
For the investor side of it, sometimes by doing this with them, it makes them, obviously, more keen to do more, but it gives them confidence knowing that, ‘hey, we’ve made good money on this one and we’ve got that support of the backend, if we want to take another chance or have another go at it.’
Some people get a taste for it and go, now we know it works, we’re gonna do it again.’