Hi All
I am looking for some guidance and assistance. I am in the process of looking for my first house near a University (I work at one). I aim to try and benefit from the student rental market in one of two ways. First option would be to buy land, build house with purpose built 1 / 2 bedroom flat under same roof. Second option would be to buy a house and renovate to include a 1 / 2 bedroom flat under same roof or in the rear garden if i can find a suitable corner plot. I aim to finance with a interest only loan as long term plan will be to rent out additional rooms as we move up the ladder. This will have an offset account attached so i am able to draw down on cash as new investments become available.
Does anyone have any opinions on this action plan and if so what pro's or cons are attached to either?
Look forward to an interesting debate
Regards
Hi Neil
Depends on the Council area
In Brisbane, be very careful on how this is structured. It will most likely breach the house code and Council are cracking down on this.
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Hi
Thanks very much for the quick response. I am based on Sunshine Coast so will need to investigate further. Had hoped that with extra rooms being under same roof it may make the process easier as am aware Granny Flats seem to be frowned upon. Why fails me given the tight housing market!!
Regards
Just be aware that a lot of houses which are enclosed underneath and self contained living quarters are not of legal height, and therefore these living quarters can't legally be rented out as such. Still possible with a private agreement i guess and I wouldn't imagine students would have a problem with it.
Neil from a financing perspective a security with a built in downstairs will not be palatable to many lenders.
Many will consider it as a specialised security especially if you have 2 kitchens, bathrooms etc.
Similar to a turnkey arrangement so might need so careful massaging a dealer thru to obtain a meaniful lvr.
Can think of a couple of lenders though that would not have an issue.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Neil
I have a new planner starting on Tuesday that is ex sunshine coast council and she is going to be doing all our SC work. I will run it past her.
The problem in Qld is that the definition of a house changes once you rent to different people. The grammar is somewhat wrong but the Supreme Court has supported it.
If a group of people come together to rent off a landlord that is normally a house, if the individuals or groups are discrete individuals or groups then the use is no longer that of a house. Separate leases are evidence of the individuals or groups being "discrete", as is not sharing common household expenses like electricity, water and gas.
If the local council has a specific zoning for it, or a specific part of their planning scheme which allows it, then that is ok. There is also a chance that a local council tolerates the practice by not enforcing it, but that does still not make it a legal use.
Brisbane City Council it is outright no go and they are currently sending enforcement notices to property owners, they have done internet searches of rental ads to find these properties. They appear to be doing it by suburb at the moment.
If you are in another council area and it does not have a specific code allowing it, I would not be buying a property based on the ability to rent separately, if it still adds up as renting to one group then well and good. Your council could stay with not enforcing it for ever, or they could hit you with enforcement notices requiring you to stop renting to separate parties.
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Thanks, having spoken with my wife we may now tackle this another way. Buy our PPOR on an interest only with offset account. Pay into offset as much as we can and then draw down on some of that in the next year or two to purchase a house and sublet all rooms out instead. This may be a better way to structure it so as to avoid any issues down the line..
Hi Rick, i am aware of that. The only thing i could do in that instant would be to jack up the house a bit and re stump to ensure legal height achieved. Returns would need to be there as suspect cost would be high for a project such as that
Hi Richard
Thanks very much for the heads up. As i mentioned further up the chain i am now considering tackling this from a different perspective. Possibly along the lines of Buying some land, building a PPOR so as to benefit from the FHOG of $15K (too great to ignore). Possibly structure the loan as an interest only with offset account. Pay all we can into offset account and once we get sufficient capital together purchase an investment property for the sole purpose of student let. That way around we have a normal house with multiple bedrooms / bathrooms, single kitchen however possibly higher rental income as will let furnished rooms individually. May possibly book some time with you as would like to get a feel for the best way to do this as this will be our first purchase and would be the starting point for any future purchases
Regards
Neil
Hi Neil
Again don't want to put a dampner on the idea but i can think of a lender or two who would have a problem with the multiple let aspect of your idea.
Similar comparison would be the same as those lenders who want to consent to any single lease over 12 months.
Hard to believe but it all boils down to resale in the event of repossession.
Lender takes possession of the property and has to resell it and you have a Corporate lease for the next 4 years.
Lesser market resale opportunity as the property couldn't be sold to an owner occupier. Multiple Student lets have the same potential issue.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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