Granny flats worse investments than vending machines: Gavin McPherson

Investors are better off buying and operating vending machines than building a granny flat, according to Gavin McPherson, the head of property investment firm Oasis Property Group.

He says granny flats are for poorly informed investors in inferior areas and they attract bad tenants.

“The people that peddle this product trade on the lowest rung of investor,” McPherson told Property Observer. “Smart money knows better and doesn’t touch it.”

In NSW regulations only allow granny flats to be built on properties with a 14 metre frontage which McPherson says is only possible in the suburbs which aren’t ideal for investors.

“The stronger inner urban areas (i.e. the eastern suburbs, the north shore and inner west) thrive because it doesn’t allow this.”

“The bi product also of this is YES it does breed a very low class tenant.

“Cash flow is fine, but if you really are searching that hard for cash-flow – work an extra two to four hours a week (without the granny flat investment that does nothing for your capital value of land) or buy coke vending machines.”

But Jo Chivers, director of development firm Property Bloom, says it can add value to a home or investment in the short and long term.

“From a development perspective, it can be a quick and easy way to build your property portfolio and create high rental yields.” she wrote in July.

“Owners can benefit from cash-flow from the rent on two dwellings and also receive good depreciation benefits on the new flat (if being rented).  This means people can keep moving forward with their investment strategy.

“Unlike buying a single apartment for instance around Sydney which is likely to be negatively geared, adding a granny flat to a property with an existing dwelling can result in a cash-flow positive situation.”

She says small secondary dwellings are an attractive option for singles and couples – one of the fastest  growing sectors of the population.