How We Turned A 3% Yield Into 6% (Without Buying More Land)

A real estate agent who runs one of the biggest agencies in North Queensland hired me to fix a problem he couldn't fix himself. He needed a foundational asset, Melbourne was the right market, and Melbourne has a yield problem. So we bought a house and then engineered the cash flow on top of it.

Every number is in this video. A Ferntree Gully house on 720 square metres for $852,000, with a tenant paying $520 a week, which is a gross yield of about 3.2 percent. A second dwelling built for $190,000 including GST. All in at $1,042,000, now renting for around $1,200 a week front and back. That's about a 6 percent gross yield on a Melbourne house, holding costs of about $13,000 a year, roughly $11,000 a year of depreciation, and cash flow positive from year one.

The number that explains the whole play: the build cost $190,000 and the second dwelling brings in around $550 a week, which is roughly a 15 percent gross return on the capital spent. You can't buy that yield in Australian residential property. You can only manufacture it, and only on land you already own.

I also cover the planning rules properly. Victoria is now the most permissive state in the country: in most cases no planning permit at all, only a building permit, and Planning Victoria states in writing that you can rent to unrelated persons. New South Wales works differently, with a 450 square metre minimum lot for the fast pathway. Both states prohibit subdivision.Plus the depreciation advantage that makes these deals work, and the 3 things that make these deals fail.

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‍General information only. Not financial, tax, legal or planning advice. Check your state and council. Real client example, results vary.