Why Property Investors Love BOARDING HOUSES
Why Invest in Boarding Houses & Why More Property Investors are Finding Boarding Houses Attractive Real Estate Investments
There has been growing residential housing demand. More demand close to major city centres throughout Australia, causing governments to seek more affordable housing options. This demand has fuelled higher investment returns and is the reason why property investors love boarding houses.
In 2009 the NSW State government introduced a new affordable rental housing policy. This State Environment Planning Policy – Affordable Rental Housing 2009 (ARHSEPP) was formulated to increase the supply and affordability of rental & social housing in New South Wales. This has, in turn, led to increased demand and higher property values for boarding houses.
What are boarding houses? What does boarding house mean?
Over the years, boarding houses have been unfairly perceived to provide accommodation for troublemakers in our society. Although there might have been the occasional lousy element in the past due to bad management, things have changed a lot in recent years.
In addition, many boarding houses are well-appointed with quality inclusions hardly noticeable in residential and commercial areas. As such, boarding homes are well designed and have well managed house rules to attract reliable quality tenants. Thus they provide an excellent, consistent cash flow income for the owners.
Boarding houses aim to provide affordable low-cost shared housing accommodations for people who do not have the need or affordability to pay rent via traditional housing accommodations.
Some people consider boarding houses residential investments, while others classify them as commercial property investments. The following article goes through the main differences.
What are the benefits of boarding houses for property investors? Are boarding houses profitable?
Generally, boarding houses give better returns than traditional residential properties. It is common for boarding house investment properties to return double (or sometimes more) the gross income for similarly priced residential real estate, whilst, at the same time, enjoying similar capital gains.
For example, throughout the major areas of Australia, we are currently seeing net returns on normal residential property around 1-2%, whilst recent sales of boarding houses have shown net investment returns of around 5-7%.
This return is usually higher than most other quality commercial property investments in similar areas, which generally show returns of between 3.5 and 5 % net return.
(Please note that most residential property journalists quote gross returns and not net returns, i.e. rent collected before the payment of expenses, when talking about residential property)
The planning policy allows for exclusive bonuses in Floor space for lot size.
There can be various tax advantages.
What are the features of boarding houses? What is a boarding house, tenancy?
They provide lodgers short-term rental residency for a period of three months or more.
They may have a separate or shared bathroom, kitchen, laundry, and living/common area rooms.
Part or all of the building can be rented out for lodging.
How do you set up a boarding house, and where are you allowed to build them?
You were allowed to build boarding houses with council consent in most areas, including low, medium, and general residential areas.
Property investors and developers would have to lodge applications with the council for assessment. This assessment will consider the consent based on the building’s design, fire safety compliance, and various environmental factors.
The boarding house development should also be designed to be in character with the local area.
What is the maximum number of rooms allowed?
In New South Wales, new boarding house developments in low density, areas are limited to 12 or fewer rooms. In other areas, the maximum amount of rooms permissible would depend on the floor space ratio and height limits relevant to local council environmental plans.
What are the other special requirements for these boarding house property investments?
The rooming house development proposal should be appropriately designed to be in harmony with the local area
The boarding house property investment should be close to public transport services.
There should be appropriate landscaping and property setback to be congruent with the existing Streetscape.
There should be at least 20 m² of open private Space to be included and eight m² next to the boarding house manager’s accommodation (where applicable) in addition to the Front of property setback.
There should be one car parking spot for every two rooms in all locations and one parking spot for each person who’s working with the development and is also a resident on the property. Also, one cycle parking space required for every five rooms.
At least one communal room should receive at least three hours of direct sunlight during the day in mid-winter.
The smallest room size is 12 m² for single rooms and 16 m² for double bedrooms with a maximum room size of 25 m².
A maximum of two lodgers is allowed per room.
At least one communal living area is required for the house residents if the boarding house has more than five shared boarding rooms.
The lodging-house must have a reasonable kitchen and bathroom shared facilities within the complex. Self-contained food preparation areas and bathrooms are allowed but not a requirement for each room.
In addition, an on-site manager is required if the accommodation house has 20 or more residents.
When a boarding house is developed in a commercial zone, the ground floor which fronts the street cannot be used for residential purposes. The only exception is if another planning instrument permits it.
Owning a Boarding HouseSound like a good Property Investment for You?
To sum up, it may be possible that the highest and best use of your property could be for a boarding house property investment. Like to find out? Contact Con Tastzidis at CST Properties on 02 9882 2221 for more reasons why property investors love boarding houses and why you might too. For a free appraisal on 02 9882 2221 or fill out this form via this link
Ready to consider a Boarding House for your property Investment portfolio? Follow link to see our latest boarding house listing – To have a look at our newest listing follow this link.