---
title: "They Laughed at This $640K House. Now It Earns $885 a Week."
description: "Real walkthrough of a $640K off-market Melbourne house generating $885/week rent after $60K renovation. 6.5% gross yield. Front house $540/wk + granny flat $345/wk. Full breakdown inside."
author: Joey Don
date: 2024-10-28
category: Renovation & Development
url: https://premiumrea.com.au/blog/640k-house-885-week-rent-real-walkthrough
tags: ["case study", "granny flat", "renovation", "rental yield", "off-market", "positive cash flow", "Melbourne"]
---

# They Laughed at This $640K House. Now It Earns $885 a Week.

*By Joey Don, Co-Founder & CEO at PremiumRea — 2024-10-28*

> In a market where most investors are bleeding cash, this $640K off-market purchase generates $885 per week in total rent — a 6.5% gross yield that covers the entire mortgage. Here's the live walkthrough.

I'm standing in a three-bedroom house in Melbourne's southeast that we bought for $640,000 five months ago. The bank valued it at $700,000 within weeks of settlement — a 9.4% paper gain before we'd touched a thing.

But the capital appreciation isn't why I'm filming this walkthrough. I'm here because this property is about to list for rent at $885 per week, and we spent a grand total of $60,000 on the renovation.

That's a 6.5% gross yield. In a market where most investors are subsidising their mortgages to the tune of $1,500 a month, this property covers its own costs from day one. The owner put down a deposit and now the tenants pay everything else.

Let me show you exactly what we did and why it works.

## How we found it (and why you can't find one on REA)

This property never appeared on realestate.com.au. We bought it off-market — meaning we secured it through our agent network before it went to public listing.

When you buy as many properties as we do in the same corridors — Cranbourne, Hampton Park, Narre Warren, the broader southeast — the local selling agents start giving you first crack at their listings. They know we settle fast, we don't renegotiate after building inspections unless there's a genuine structural issue, and our finance is pre-approved. That track record earns priority access to properties that would otherwise generate 40 competing offers on the open market [1].

This particular deal came through an agent who had a vendor wanting a quiet sale. No advertising costs, no open inspections, no six-week campaign. Just a clean unconditional offer at $640,000 and a 60-day settlement. For the vendor, it was certainty over theatre. For our client, it was a $60,000 discount versus what comparable properties were fetching at auction.

The lesson here is simple but bears repeating: the best investment properties almost never make it to the public market. If you're only searching on REA and Domain, you're shopping from the leftover rack.

## The front house: three bedrooms, $540 a week

The main dwelling is a standard three-bedroom, one-bathroom brick veneer on a 600-plus square metre block. When we bought it, the interior was tired — original 1980s carpet, a kitchen that hadn't been updated since the Howard government, and paint that was somewhere between "cream" and "nicotine."

Our renovation was deliberately minimal. We don't over-capitalise on investment properties, and we especially don't over-capitalise on properties in the $600,000-$800,000 bracket where tenants are looking for clean and functional, not designer.

Here's what we spent on the main house:

- SPC flooring throughout: $5,000 (labour and materials at roughly $55 per square metre)
- Full interior repaint: $4,500
- New kitchen — IKEA flat-pack cabinets with laminate benchtops: $8,000 installed
- General clean and minor repairs: $2,500

Total front house renovation: approximately $20,000.

The result? A three-bedroom house that looks and feels semi-new. Fresh flooring, modern kitchen, clean walls. We've listed the front at $540 per week, which is competitive for the area — not the highest, not the lowest. Competitive pricing attracts multiple applications quickly, and a shorter vacancy period is worth more than an extra $20 a week that takes three additional weeks to achieve [2].

## The granny flat: one bedroom, $345 a week

This is where the deal becomes special. The previous owner had already built a compliant granny flat in the backyard — a standard one-bedroom, one-bathroom unit of approximately 30 square metres with its own entrance, kitchenette, and bathroom.

The granny flat had a Building Permit and was approaching Occupancy Certificate (OC) status, which meant it could be legally rented from day one after we completed the final compliance steps. We didn't need to build from scratch — we inherited a legal second dwelling that the previous owner had invested roughly $110,000 to construct.

Our renovation spend on the granny flat:

- New SPC flooring: $2,000
- Interior repaint: $1,500
- Split-system air conditioning (required for rental compliance): $2,500 installed
- Updated bathroom fixtures: $3,500
- General clean and minor works: $1,000

Total granny flat renovation: approximately $10,500.

The granny flat lists at $345 per week. In this area, a newly renovated one-bedroom studio with its own bathroom and kitchenette — where the tenant has complete privacy and a separate entrance — rents within days. The demand for affordable single-person accommodation in Melbourne's southeast is extraordinary. Vacancy in this corridor sits below 1.5%, and our granny flats typically receive 15-25 applications within the first week of listing [3].

Combined renovation spend: $20,000 (front) + $10,500 (granny flat) + $29,500 (additional works and contingency) = $60,000 total.

## The numbers that matter

Let me lay this out properly because the yield calculation is the entire thesis.

Purchase price: $640,000
Total renovation: $60,000
All-in cost: $700,000

Front house rent: $540/week
Granny flat rent: $345/week
Total weekly rent: $885/week
Annual rent: $885 x 52 = $46,020

Gross yield: $46,020 / $700,000 = 6.57%

Now let's look at the cash flow position. Assuming 80% LVR on the original purchase price ($512,000 loan) at 6.2% interest-only:

Annual interest: $31,744
Council rates: $2,000
Water rates: $650
Insurance: $1,800
Property management (dual occupancy at 6.9% + GST): $3,500
Maintenance reserve: $2,000
Land tax: $2,000

Total annual holding costs: $43,694
Annual rent: $46,020

Net annual surplus: $2,326

It's not a fortune. But it's positive. In a market where the average Melbourne investment property generates negative cash flow of $8,000-$12,000 per year, breaking even — let alone coming out ahead — is a significant competitive advantage [4].

And here's the part most people miss: this property also appreciated 9.4% in five months. The bank's desktop valuation came back at $700,000 on a $640,000 purchase. That $60,000 of unrealised equity gain is sitting there, ready to be extracted through refinance when the timing is right.

## Why this strategy matters more in 2022

I'm going to be blunt. In the current rate environment, 80% of the strategies that worked during the COVID-era low-interest period no longer apply.

Buying a negatively geared property and waiting for capital gains to bail you out? That was a viable strategy when interest rates were 2.5%. At 6%, the holding costs make that equation painful. I know investors — people who bought in Brisbane and Perth during the frenzy — who are now selling because they can't sustain the monthly cash drain.

The strategy that still works is the one we've just walked through: buy below market via off-market access, add a second income stream through an existing or new granny flat, renovate for under $60,000, and achieve a yield that covers all holding costs.

Our firm has built this model across more than 200 transactions. The formula is consistent: purchase price between $600,000 and $800,000, land value exceeding 80% of total price, block size above 550 square metres with side access greater than 3 metres (for crane truck entry if building a new granny flat), and a total yield target of 5.5-6.5% after renovation [5].

The properties that fit these criteria are rare. They don't sit on the open market for weeks. They get bought by people with networks, pre-approved finance, and the confidence to make unconditional offers.

> "The only question I ask about any investment property is whether it can pay for itself from day one," says Joey Don. "If the answer is no, I don't care how much the suburb is 'about to boom.' Self-funding is the minimum. Growth is the bonus."

## What this property could become

Beyond the rental yield, this property has development optionality that could multiply its value over the next 5-10 years.

The block is 600-plus square metres with a layout that supports a three-lot subdivision. If the owner decides to knock down the existing house and build three townhouses, comparable vacant land in this suburb trades at $300,000-$350,000 per lot. Three lots at $320,000 each = $960,000 in land value alone, versus a $640,000 purchase price.

That's not a strategy we're executing today — the rental income is too good to interrupt. But the option exists. And having that option embedded in the land is what separates a genuine investment from a property that just happens to have tenants.

This is what I mean by "buy land, get the house free." The house generates income. The granny flat generates income. But the land is the asset. And the land doesn't depreciate, doesn't need new flooring, and doesn't call at 2am because the hot water system died.

The tenants pay the mortgage. The land builds the wealth. Everything else is maintenance.

## References

1. [PremiumRea off-market acquisition network. 200+ transactions providing priority access to pre-market listings in Melbourne southeast.](#)
2. [SQM Research, 'Median Rental Prices — Melbourne Southeast, 2022'. Three-bedroom house rental ranges by suburb.](https://sqmresearch.com.au/weekly-rents.php?region=vic-Melbourne&type=c&t=1)
3. [SQM Research, 'Residential Vacancy Rates — Melbourne Southeast, 2022'. Sub-1.5% vacancy in established southeast suburbs.](https://sqmresearch.com.au/graph_vacancy.php?region=vic-Melbourne&type=c&t=1)
4. [CoreLogic, 'Australian Housing Market Update Q3 2022'. Average holding cost analysis for Melbourne investment properties.](https://www.corelogic.com.au/)
5. [PremiumRea investment criteria. Land value >80%, block >550sqm, side access >3m, target yield 5.5-6.5%.](#)
6. [Victorian Building Authority, 'Granny Flat Regulations Victoria 2022'. Building permit requirements for secondary dwellings under 60sqm.](https://www.vba.vic.gov.au/)
7. [ABS, 'Building Approvals, Australia, August 2022'. Dwelling approval trends in Melbourne metropolitan region.](https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/latest-release)
8. [PremiumRea renovation cost benchmarks. SPC flooring $50-70/sqm, kitchen refresh $8-13K, full repaint $4-5K.](#)

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Source: https://premiumrea.com.au/blog/640k-house-885-week-rent-real-walkthrough
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent