Granny Flat OR Subdivide? (My ROI Winner 🏆)

[@matthewxcountry]

A subdivision is better if you plan on selling at some point or using the equity to buy more property. Owner-occupiers typically don't pay much more for a granny flat out the back and don't necessarily want close neighbours, so they aren't willing to pay the premium for the granny flat near sale time. So from an equity perspective the subdivision is better. However, if you want to hold this property forever, a granny flat might be better for increased cash flow at a much lower cost and less stress from tougher building codes for new houses compared to granny flats. For me the subdivision is the winner, but I can see that in some unique circumstances one might prefer the granny flat. Question: If you build a granny flat that meets the minimum requirements of a new home, can you subdivide later without demolishing? If yes this might be an option for someone who wants the cashflow now, but doesn't have the money for a new build package.

[@MrkaoPL]

Hi Luke, Thank you for sharing your property investment journey so openly, I have found many learning points! Could I ask you to help me understand something in your video? Note I am a structural engineer not and accountant; But for the subdivide and dual occupancy option haven't you actually calculated the gross yeild not the net yeild? Likewise haven't you calculated the gross income not the net income? There will be significant interest and holding costs associated with this 855k purchase which have not been accounted for in the net income and net yeild calculations, thus it would seem that your actual net income and net yeild on that option would be far less favourable than what the video purports, if not, what am I missing in my understanding here?

[@douglaspaulsilva]

Hey Luke, shouldn't you be accounting for the opportunity cost of the 250k cash invested in the Granny flat? You could also parked that money on a 5.50% high interest account and would produce 14k on interest. On my view, that's something you should be including as it's a hidden cost not being accounted for. Also, shouldn't you include also de interest for the 20%deposit + expenses? since all the money is coming out from debt as well.

[@Chris-xu6wy]

If I put granny flat on Woree cairns property can I subdivide it with 2 titles?

[@mariabonita3361]

Yay! Been hoping to see these two options compared in depth so thank you for making this video. 😊 I’m wondering though - how hard is it to add a granny flat or subdivide in Brisbane and Gold Coast area? My carpenter neighbour said it took his established builder boss a long time for get approval to build a granny flat in his property. I was thinking what more for ordinary people? 😅

[@rw-xf4cb]

What's your thoughts on relocatable homes - David Wright/MacKay and Sons etc? If you get a cheapish block and relocate a house you can put a 3 bedroom on it for say $150K or so.

[@mrdobalina3451]

You said you pulled the deposit from equity from refinancing other investment loan so you should probably add the extra interest you will now pay on that investment loan too. It also sounds like you may need to include land tax if you have a total land property portfolio of 600k of more in ANY state (from next year). I assume you’re doing tricky stuff with trusts possibly.

[@lukewiles1]

Which option would you choose? Granny flat or subdivide and build

[@annavax7280]

Where can I find a cheap granny flat kit ? Can you share a link ?

[@jeffg939]

I was also interested In this exact property for a granny flat, but was edged out by favourable terms haha. Now I know.

[@lukewiles1]

@jeffg939 sorry mate!

[@Dawulfman78]

Thought Logan city council restrict sub dividing? Im probably wrong

[@JJ-zn6ql]

Thoughts on creating a sub dwelling without subdiving until later on?

[@lukewiles1]

Very likely what we'll do. Allows us to minimise the holding costs & cheaper build cost but have the option down the track to subdivide and sell front and back homes.

[@JJ-zn6ql]

@@lukewiles1 Awesome, planning on the same thing. Thanks for the videos and going into the numbers for us. :)

[@kierangan7944]

The cash flow would be horribly negative if you were to subdivide and build the dual occupancy on 80% Loan at 7.74% interest rate. You were assuming that the $620k build and subdivide costs are paid for in cash.

[@lukewiles1]

@kierangan7944 yes that's right. Assumed the development/granny flat would be in cash. If you don't put any money in, can't expect to have a decent cashflow at 8% interest rates

[@Superheroes_Realty]

Luke, what are the approximate costs to subdivide in Logan ?

[@lukewiles1]

In the video - I budgeted $70k. Going to be super dependent on the property & civil works required

[@roxychic367]

Wait is there No land tax?

[@lukewiles1]

Not for me! Below the qld land tax thresholds

[@MarkusWehrhahn-k1s]

Nice one Luke, personally I prefer a rooming house leveraged at 90% cash flow positive from day and pulling out equity upon completion once it’s revalued based on commercial yields. But subdivisions are great for sure!

[@herbalogie4971]

May I ask how you pull out equity on completion?