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David P.
David P.
Springvale, VIC
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Our house is at the front of a 1200 square metre block and we are thinking of building a granny flat out the back to rent out and obtain additional income. Apart from obtaining council approval and building quotes, is there anything we need to be aware from a finance perspective?

7 years ago

Responses

Hi David

That is a very interesting question and one that is getting more and more popular than you might think.

From a finance perspective, there are a few things to consider. Apart from your normal income, when looking at how much finance you can borrow, some lending institutions will differ on whether they will include the rent on the "granny flat" or not as additional income.

Then there is the question of how you want the process to go. Do you want to do it as a construction loan where the lender controls how much money you can draw out for the build Or do you want to just simply get a chunk of money out (accessing your equity) and using that as and when needed. How you proceed will of course depend on your own individual situation.

I am in Melbourne, I would love to continue the conversation with you further.

Regards
Dien
0400 889 022


Hi David,
Adding a graany flat can be a great way to create an income source.
One quick thing before adding a granny flat is to make sure you speak with an accoutant about the capital gains implications of having part of your property rented out.
Part of this process will be to obtain a property valuation to establish the base value in case you sell in the future.
From this valuation you should be able to establish how much eqiity you have in your house.
If you have enough equity in your property to fund the granny flat, this probably the simplest and easiest way to fund the granny flat construction.
If you don't have enough equity in your property you will need to get a construction loan. With this you will need to speak with a mortgage broker because each lender has their own policy around lending for granny flats.
Due to concerns about devaluing the original house some lenders make it very difficult. For other lenders they will take into account the final product which might include things like improved landscaping.
have any questions fell free to contact Awesome Lending Solutions.
best of luck
Albert

Comments

Thanks, Albert

I hadn't taken the CGT implications into consideration so I will follow this up with my accountant first.

Thank you for the information, regards

David

Hi David,
Just wondering if you have discussed your options with a financial planner? There may be other ways to get the extra income you are after without devaluing your main asset?
Give me a call if you would like to meet a planner that we can work with together?
Regards
Scott

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