Explore a case study about your investment in a Wollongong Granny Flat, created by Matthew Howarth, the principal at Equiti Financial mortgage broking, that shows how it can increase its value, improve cash flow, and help pay your mortgage faster.
In this example scenario, we’ll show how adding a granny flat to an existing Wollongong property could bring significant financial benefits. While each property is unique, this case provides a general idea of how building a granny flat might increase cash flow, boost property value, and accelerate mortgage repayment.
Imagine a 3-bedroom, 1-bathroom house in Wollongong valued at $1,000,000 with a 50% loan-to-value ratio, meaning the homeowner has an outstanding mortgage of $500,000 at an interest rate of 5.5%. By investing $170,000 to build a 2-bedroom, 1-bathroom granny flat (please note the cost of a Wollongong Granny Flats is not fixed and fluctuates significantly per job, so this amount is purely for case study purposes), the homeowner could take advantage of Wollongong’s annual property growth rate of 7% and generate rental income of approximately $500 per week. The additional rental income could result in an annual positive cash flow of $13,472.
In our example, the homeowner might use this extra income to make additional mortgage payments, potentially reducing their mortgage repayment period by up to 9 years. The increased property value from the granny flat and the consistent rental income could provide a substantial long-term financial benefit.
While these figures are based on hypothetical assumptions, the potential benefits are clear: higher property value, extra rental income, and the ability to pay a mortgage faster. This example illustrates how adding a granny flat could be a wise investment for many Wollongong homeowners, offering immediate financial benefits and long-term value growth.
While these figures are based on hypothetical assumptions, the potential benefits are clear: higher property value, extra rental income, and the ability to pay a mortgage faster. This example illustrates how adding a granny flat could be a wise investment for many Wollongong homeowners, offering immediate financial benefits and long-term value growth.
Key Assumptions:
$1,000,000 median price in Wollongong (3 bed 2 bath house)
7% annual capital growth rate for Wollongong
$500 weekly rent on granny flat (2 bed 1 bath)
5% annual rental growth rate
$170,000 build cost
5.50% interest rate / 25 years remaining on loan
Not making any extra loan repayments
Currently owe 50% on the house mortgage
Borrow 100% of granny flat cost
This case study scenario highlights the potential financial impact of building a granny flat, showing how a well-planned addition could improve cash flow, property value, and mortgage management.
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