- June 6, 2018
Class 1B Projects
Local, state and federal governments have recently enacted changes to planning and development laws, allowing private investors to develop “modern micro apartments”, also known as “new generation” boarding house developments.
In certain areas, developers are now permitted to build and lease these micro apartments in buildings of a larger size than would normally be permitted in low-density areas.
Even better, is that in some cases, a planning permit can be avoided, resulting in significant time and cost savings for the developer.
Class 1B’s are more streamlined than owning a block of apartments, due to having no body corporate fees.
Housing affordability issues, and the growing desire for a low maintenance lifestyle is driving this sector in Victoria.
Tenanted by young professionals, middle-aged people, divorcees and retirees who are squeezed out of the housing market.
A growing number of Australians do not live in “nuclear” families. There is a need for greater housing choices for people who love the suburbs and wish to keep their existing social networks. They are not looking for a family home, and often cannot afford one.
In new generation boarding house developments, the rooms are typically self-contained with kitchenette and ensuite. Tenants are subject to residential tenancy agreements and substantial bonds, which adds a layer of protection for investors. Standard agreements are usually 6-12 months in length, and are generally renewed. Occupancy rates are usually well over 90 per cent.
Boarding houses differ from typical apartment developments, in that the boarding house is built as a business, as opposed to a property to be on-sold for capital gain. Boarding houses are often cashflow positive from day one, with net rental returns often in the 8-9 per cent range. Moreover, it is quite possible for this surplus cashflow to pay off development loans in remarkably short timeframes.
One bedroom units tend to rent very well. They are snapped up by university students, young doctors, nurses and teachers.
New gen boarding house projects are now attracting a lot of interest from mums and dads, and those running self-managed super funds.
Current live examples of these projects (with 9 lettable rooms) have regularly yielded up to $140,000 in rent per-annum. If you would like more information, or a tour of a current boarding house project please call or email us.
Management of tenants
There is obviously a higher workload required to manage multi room tenancies than a standard residential leasing situation. In response to this, there are now many property management companies who specialise in boarding house management.
For tenants, a new gen boarding house offers a good alternative to shared accommodation, with more safety and privacy. Smart investors in Melbourne are now developing Class 1B’s because of their high yield and lower risk. Many are holding the properties for the long term to help pave the way to a self funded retirement.
Most retirees are looking for an investment which creates financial freedom, and enables them to start doing what they really want to do.
Through this strategy, many savvy investors have regained control of their superannuation and freed up their time significantly.
If you would like more information about designing, financing and building a Class 1B boarding house project, feel free to leave your details on our enquiry form or simply call us on 1800-DUALOCC.