Analysing the Numbers: Our Latest Investment Property Purchase and Potential Expansion Plans

Today I’m getting a bit personal and diving into into the numbers and analysis behind my own recent investment property purchase in Shailer Park, Brisbane. I want to explore the exciting possibilities of adding a granny flat or subdividing the property to create a dual occupancy down the track.

The Property Purchase

We recently purchased a 1012 square meter block with a 3-bedroom, 1-bathroom home. The property was acquired for $855,000, and after factoring in additional costs such as solicitor's fees, stamp duty, and other pre-purchase expenses, the total funds required amounted to $889,200. The property is expected to generate a weekly rental income of $600 to $650, with a vacancy rate of 2 weeks per year, resulting in an annual rental income of $32,500. However, the property is currently negatively geared, with annual expenses (including interest, council rates, insurance, property management fees, and maintenance) totaling around $60,000. This means the property is costing us approximately $27,552 per year, or $530 per week, before any tax benefits.

Exploring the Granny Flat Option

To improve the cash flow, we've explored the option of adding a granny flat to the property. Based on our estimates, a premium granny flat could cost around $250,000 to build and could potentially rent for $550 per week. By adding the granny flat, the annual rental income would increase to $60,000, while the additional operating expenses (management fees, rates, and maintenance) would be around $7,000 per year. This would result in a net annual cash flow of $7,052, or $135 per week, turning the property from a negative to a positive cash flow position.

The Subdivision Opportunity

Another exciting option we're considering is subdividing the property and building a dual occupancy on the back portion. Our analysis suggests that we could potentially fence off the back of the property, creating a 600 square meter block, and build a new 244 square meter dual occupancy dwelling at an estimated cost of $550,000. By subdividing the property and building the dual occupancy, we could potentially achieve a total property value of $1.7 million, with the front house valued at around $700,000 and the new dual occupancy dwelling valued at $1 million. This would result in an equity gain of approximately $225,000 and a net annual cash flow of $19,000, or $365 per week.

The Decision-Making Process

As we evaluate these options, we're considering factors such as our risk profile, the potential for equity growth, and the impact on our overall property portfolio. The subdivision option presents a higher potential for equity gain, but it also requires a more significant upfront investment. The granny flat option, on the other hand, offers a more immediate improvement in cash flow. Ultimately, our decision will be guided by our long-term investment strategy and the ability to maximise the potential of this property. We'll continue to analyse the numbers, explore the feasibility of each option, and make a decision that aligns with our goals and risk tolerance.

Stay Tuned for Updates

We're excited to share the progress of this investment property with you. Whether we choose to add a granny flat or pursue the subdivision, we'll be sure to provide updates on the process and the results. Be sure to subscribe to our channel and follow us on social media to stay informed on this and other upcoming projects.