2015 National Property Investment Clock
12 May 2015
Property Observer
Granny Flats – a Win-Win For All Parties?
Ipswich Granny Flats, your local Granny Flat Experts, bring to you another interesting snippet :
Wally David
www.thesmartmoney.com.au
02 May 2015
Are Granny Flats a Win-Win For All Parties?
The short of it…
- A granny flat can be a win-win scenario for a parent and their adult child.
- A granny flat interest is where you exchange assets or money for the right to live in someone else’s property (generally your children or grandchildren’s property) for as long as you live.
- Centrelink will allow you to pay or transfer a certain amount of money for your granny flat, without affecting your pension.
- It is vital you have a formal agreement drawn up to ensure that everything is documented.
The long of it…
If you’re contemplating the idea of downsizing your home, you could consider the option of a granny flat.
It could potentially be a win-win scenario. Think about it…living nearby family in your latter years in a safe, secure environment, providing you the ability to stay at home for longer and perhaps avoiding or delaying the need for a retirement village or nursing home. It’s also likely to be a cheaper option than another home, unit or retirement village so you may be able to pocket some change from the exercise to use for other purposes.
On the flip side, the person you move in with (presumably your child or grandchild) gets a lump sum to construct or make modifications to their home for your living quarters. This will eventually add value to their home. Alternatively, if they already have the space it could mean a sum of money to reduce or pay off their mortgage.
What is a granny flat?
Traditionally, a granny flat has been a part of a house that provides self-contained accommodation for an elderly relative.
From Centrelink’s point of view, a granny flat interest is where you exchange assets or money for a right to live in someone else’s property for as long as you live. Commonly this will be in the home of one of your children or grandchildren, though not always the case.
An alternative is to transfer the ownership of your existing home to one of your children but retain a right to live there for the remainder of your years.
A granny flat must be part of any private residence and cannot be owned by you or your partner.
Granny flats and Centrelink – How does a granny flat affect your pension?
Centrelink will allow you to pay or transfer up to a certain amount of money for your granny flat, without affecting your pension entitlements. This is known as the reasonableness test amount.
The reasonableness test amount is based on the following formula:
Combined annual Age Pension rate for a couple MULTIPLIED BY a conversion factor
Sounds complicated? Bear with me…
The conversation factor is based on your age. You can click here to find out the current conversion factor for your age. If you’re a couple the age of the younger partner is used.
For example, Charles (who turns 84 next birthday) and Edna (who turns 77 next birthday) purchased a granny flat right by paying $350,000 from the sale of their home to their son.
The reasonableness test amount for Charles and Edna will be $387,507, being $33,035.60 x 11.73 (the age related factor based on Edna’s age).
Charles and Edna paid $350,000 for the granny flat which is less than the reasonable test amount of $387,507. Therefore this $350,000 will not be assessed against their pension and they will continue to be treated as homeowners by Centrelink.
What happens if you pay more than the reasonableness test amount?
You can pay more than the reasonableness amount for your granny flat interest, but any extra will continue to be assessed against your pension for a period of five years. This works in a similar way to the gifting rules with Centrelink (click here for more details). Simply, it’s Centrelink way of covering themselves by preventing people from giving away all their money to obtain more pension!
Are you still assessed as a homeowner?
It depends on how much you pay for your granny flat interest. Currently, if you pay less than $142,500 for your granny flat interest you will be assessed as non-homeowner by Centrelink. This interest will be assessed as an asset, though you will have access to the higher asset limit for a non-homeowner. You may also qualify for rent assistance if you pay rent.
If you pay more than the $142,500, you are assessed as a homeowner by Centrelink. So in the earlier example, Charles and Edna above would be considered homeowners, hence, the $350,000 they paid for their granny flat isn’t assessed as an asset by Centrelink.
This $142,500 amount is what’s known as the ‘extra allowable amount’. You can calculate this by working out the difference between the homeowner and non-homeowner asset limits.
What if the property needs to be sold?
You need to be careful as your interest cannot be revoked simply because the owner wishes to sell the property. They have three options available:
- sell the property with your granny flat interest as a condition of sale
- transfer your granny flat interest to another property, or
- have the owner of the granny flat compensate you financially for losing your granny flat interest.
You should contact Centrelink first to double-check if any of these options would reduce your payment.
A granny flat can be a win-win scenario for all parties if structured correctly. It is vital you get some advice and have a formal agreement drawn up to ensure that everything is documented. This will protect all stakeholders and prevent any disputes down the track.
Children, Aging Parents Inspire a Reno Revolution
Shane Rodgers
The Australian
13 June 2015
Children, Aging Parents Inspire a Reno Revolution
Many Australian families are building or adapting homes to house multiple generations as affordability issues, changing expectations and delayed trappings of traditional adulthood reshape the dwelling landscape.
Builders say “baby boomer headquarters” homes are being built with more separated areas, two master bedrooms, and some granny and “Fonzy” flats.
This is in line with research showing there are more “fail to launch” and “boomerang” kids who delay leaving home or return several times.
Social researcher Mark McCrindle, from McCrindle Research, said changing family dynamics meant so-called empty nesting, where kids leave home and their parents live as a couple again, was happening much later than in the past.
Mr McCrindle said many baby boomers (born between World War II and 1960) were in well-equipped, large homes and were financially secure enough to accommodate the trend.
“Many of them don’t want an empty nest and in a lot of ways they are happy to have the kids back home and to be staying active and in touch,” he said.
“Kids also seem generally happy with this arrangement. There is no longer a social stigma associated with living with your parents.”
The most recent Australian Bureau of Statistics analysis of children leaving home showed that 47.2 per cent of 20- to 24-year-olds were living with their parents, as were 16.8 per cent of 25- to 29-year-olds and 8.2 per cent of 30- to 34-year-olds.
Across all age groups, 22 per cent had left home and returned at least once and 6.5 per cent had never left home but were independent from their parents in the home.
Master Builders Queensland deputy executive director Paul Bidwell said house designers had evolved standard home plans to accommodate the changing demands. “It used to be about open space, open plan and flexibility,” he said. “Now there is a move towards separation and less open-plan and that’s about accommodating multiple generations — kids for longer, potentially grandparents.’’
Mr Bidwell said most local government areas had removed planning impediments to building granny flats but it was hard to get accurate figures on how many were being built. Similarly there was discussion about the building of “Fonzy flats” (separate flats built over garages, named after the character Fonzy on 1970s television showHappy Days) but these did not seem to be happening in large numbers.
Matthew Bell, the joint managing director of building firm Ausbuild, agreed home buyers were seeking different types of housing options as a response to changed family structures and affordability issues.
“We are certainly getting people who are building bigger homes and wanting to include a granny flat within the design,” he said. “There is also some demand for houses with two master bedrooms, which is both to give parents a self-contained area and make provision for two generations to be living in the same home.”
Ausbuild was one of the building companies involved in an experimental development in the Fitzgibbon area in Brisbane’s northern suburbs, designed to create affordable urban housing close to jobs and transport through innovative design on small blocks.
Why it’s SEQ’s Time to Shine
Ipswich Granny Flats, the largest builder of granny flats in SE Queensland, brings to you another great snippet – something that we have been saying for the last 12 months or so…
Where to buy your next investment property in Australia? Why here of course, SE Queensland – Ipswich area, not that we’re partial or biased!
So read what the experts are saying, not just us:
Why it’s SEQ’s Time to Shine
It’s much harder to time the market than passively invest for the long haul, but developers who live and breathe the property market over time develop an innate feel for market timing.
Every now and then developers have the joyful experience of being in the right place at the right time, meaning the clear start of a new market growth cycle.
The southeast Queensland market is presenting that exact experience. It’s that once-in-a-cycle moment that comes around every seven to 10 years where confidence returns to a market and buyers begin to line up with gusto.
Numerous experts – who actually understand the property cycle – and groups like CoreLogic RP Data are all singing the same tune. Brisbane and the Gold Coast represent the best value property markets in Australia right now.
Recently John McGrath, who owns 64 real estate agencies nationally, reportedly said: “Anywhere in Queensland will do well but I’d be hard pushed to find anywhere better to invest than the southeast of Queensland in the next three to five years for capital growth.” And frankly I couldn’t agree more.
John pointed out the astonishingly contrasting value for money that investors and homeowners can get in SEQ versus Sydney – $700,000 will buy you a one-bedroom unit in Sydney versus a canal-facing family home on the Gold Coast. This translates into higher discretionary income for those living in SEQ and a better quality of life. And as employment prospects and general confidence improve in the SEQ region, the room for capital growth as these affordable segments enter their growth phase could be substantial.
While Sydney has jumped almost 40 per cent in a few short years, SEQ has just started its recovery and now appears set to have its growth phase, apparently already under way.
What’s positive about the SEQ story is that as regulators (APRA) begin to tighten lending criteria to cool the Sydney boom, this will have the positive effect of locking speculators out of the SEQ growth phase.
This means that only genuine investors with capital or decent incomes will be able to secure property going forward. This is a bit unfair to those wannabes who can recognise the chance to make quick equity by taking a chance on the SEQ fundamentals, as they won’t be able to get funding. However, for developers, we’re far better off selling to solid investors as they can settle every time and we don’t run the risk of selling to buyers who have great intentions but simply can’t stump up come settlement day.
The tightening of lending criteria will mean that the boom phase in SEQ will be slower but more stable and SEQ may avoid a bust at the end of this current strong growth phase also. So, this is good news for developers and investors alike.
2015 IPSWICH PROPERTY INVESTMENT : GROWTH CENTRES GIVEN A GREEN LIGHT FOR FURTHER DEVELOPMENT
Ipswich Granny Flats, your local Granny Flat Experts, bring to you some awesome news.
http://www.qt.com.au/
18 March 2015
More than 560 residential lots have been approved by Ipswich City Council in March in the growth areas of Collingwood Park, Leichhardt and Ripley.
The rapid growth for Collingwood Park is set to continue with another 301 residential lots approved on land west of Collingwood Drive.
Planning and Development Committee chairman Paul Tully said council had approved a significant number of residential lots within Collingwood Park recently, including this new approval on Cairns St.
“This new estate will feature residential lots ranging from 316sq m to 5573sq m,” Cr Tully said.
“Stages five and six will feature more than 11ha of linear parkland beside Six Mile Creek, which will incorporate a footpath, recreation park and will conserve an area of endangered vegetation.”
Division 3 Councillor Victor Attwood said the new development was located close to a number of other residential estates, including Six Mile Creek, Collingwood Park and Woodlinks residential estates.
Meanwhile the new developers of Leichhardt’s Golf Links Estate received approval for 155 additional residential lots.
The lots range from 315sq m to 576sq m and a new park has also been approved for the estate.
Marquee Projects CEO Mark Spedding said stages 2, 3 and 4 of the development had been redesigned with stage 2 being released at the end of March.
“We have had extremely strong demand since stage 1 of the development launched back in October and as such there are only three house and land packages available,” Mr Spedding said.”We have taken a fully integrated approach to the development and have researched the market to understand what buyers are looking for, namely, affordable quality house and land package prices that have a genuine value for money proposition and working with Urbane Homes allows us to provide this to buyers as their build prices are amongst the most competitive in southeast Queensland.”
As reported in the QT on Monday a further 109 residential lots were approved for Ecco Ripley Estate, which has seen a high number of sales in early stages.
Cr Tully said development in the Ripley Valley growth corridor was thriving, and the approval of these new residential lots was critical in order to keep up with demand.
Granny Flats: Perth Homeowners Cash in on Backyards
http://www.perthnow.com.au/
Annabel Hennessey
11 May 2015
GRANNY flats are making a comeback as Perth property investors look to turn their big backyards into a revenue stream.
With Perth weekly rental returns down $30 from this time last year, some investors are looking for alternative solutions to bump up their rental incomes, including adding dwellings for extra rent.
Since the State Government introduced legislation to allow granny flats or “ancillary dwellings” to be rented to non-relatives, more investors have begun the task of adding flats.
Momentum Wealth managing director Damian Collins, who is affiliated with a granny-flat builder for clients seeking an ancillary dwelling, said he now had many clients adding flats to their existing investment properties to rent out to extra tenants.
Mr Collins said in some cases clients were renting granny flats, which can cost anywhere between $120,000-$150,000 to build, for up to $400 a week.
However, figures show it would take seven years at that weekly rent to recoup the costs, with some observers noting the flats may not be the solution for everyone’s problem.
“While a dwelling will add some value to a property, it’s predominantly a strategy for extra cash flow,” Mr Collins said. “Generally, the flats themselves will have a yield of 10-11 per cent, which has allowed some clients to turn their investments positively geared.”
Mr Collins said there were a number of advantages to the dwellings including the price — given they are cheaper than adding a second property through subdivision — the time it takes to build and their lock-and-leave appeal.
“(Granny flats) generally work best in a suburb with a shortage of units or that kind of stock available,” Mr Collins said.
Granny Flats WA managing director Mike Nicholls said since the legislation change, more than 20 per cent of his clients were investors. Typical tenants include students, travellers, FIFO workers and divorcees.
“There’s no stigma about living in a granny flat and they’re no longer seen as just for the elderly,” he said. “Young people are familiar and comfortable with the idea and many feel safer being behind a main property.”
Hegney Property Group director Gavin Hegney said investors should be wary of overcapitalising.
“If you’ve got a three-bedroom, one-bathroom property, adding a flat can be a way to give the home appeal to a wider market,” Mr Hegney said. “However, if it’s a four-bedroom in an area where there’s not a lot of demand for five bedrooms, you might think about whether it is necessary. Investors should think carefully about where on the property they locate the flat and whether it will fit with the existing home.”
Mark Hay Realty director Mark Hay said while they had their benefits, investors should be careful not to purchase a dwelling before considering their existing property.
“In some suburbs, such as Mount Lawley (in Perth’s inner suburbs), where large blocks sizes are very desirable and sought after, adding a dwelling could actually potentially devalue your property,” Mr Hay said. “Investors need to do the maths and work out whether the extra rent they’ll be getting will be worth the costs of instalment.”
The granny flat trend has been big in Sydney, where property prices have soared. NSW planning figures show 4818 new granny flats were built in Sydney last year, nearly double the 2867 built the previous year, and three times more than the 1511 built in 2010.
The trend was being driven by high prices, rental return and parents looking for accommodation for their grown-up children.
Modern granny flat a double delight
WHEN it came to buying his fourth investment property Adam Bishop went for one with space. Mr Bishop, a FIFO worker, wanted to get two rents out of the one property without the long process and cost of subdividing.
After buying a three-bedroom, one-bathroom home in Forrestfield for $430,000, Mr Bishop added a two-bedroom ancillary dwelling to the property, which is set to be rented out for $300 a week.
“It was actually quicker to find a tenant for the flat than it was for the main dwelling. We had about 15 people come through each of the home opens and they ranged from single mums and couples to other FIFO guys,” Mr Bishop said. “The main house is being rented out for $400, so because of the flat I’ve been able to turn it into a positive cashflow.”
Costing about $140,000 to build, it will take Mr Bishop roughly nine years to recoup the costs of the flat based on rent alone.
“I’m happy to have the security of more than one tenant,” Mr Bishop said. “The dwelling definitely attracted a lot more rental interest than people would imagine.”
Investor fast facts
— Renting out a private granny flat means you will lose capital gains tax-free status on that part of the property.
— Two-bedroom flats can cost about $150,000. At $400 a week rent, it could take seven years to recoup costs.
— To add a dwelling to an existing investment property you need to renegotiate with existing tenants.
— You must lodge a development application with the council before building.
— Government legislation allows granny flats to be added to existing properties and blocks over 450sqm