An $800K House Renting for $1,200 a Week. I Walked Through It. Here Are the Real Numbers.

People in Melbourne guard their rental yield strategies like state secrets. I have lost count of the number of times someone has messaged me on social media saying "that is impossible" when I share real rental figures from our portfolio. So today I am not going to argue. I am going to walk you through an actual property, with actual numbers, and let the data do the talking.

This is a house in Melbourne's southeast that was purchased for under $800,000 on a 600-plus square metre block. After an internal conversion costing around $80,000, it now rents for $1,200 per week. That is a gross rental yield north of 7.8 percent — in a city where the average rental return hovers around 3 percent 1.

And the land value? Growing at roughly 8-10 percent per year. Because this is not some regional outpost or a strata-titled shoebox. This is a proper house, on proper land, in a suburb with genuine population pressure.

Why Narre Warren specifically

Let me explain why this suburb works before I explain what we did to the house.

Narre Warren sits in Melbourne's southeast growth corridor. It is part of the Casey local government area — one of the fastest-growing municipalities in Australia. The suburb has established infrastructure: Westfield Fountain Gate (one of the largest shopping centres in the southern hemisphere), multiple primary and secondary schools, the Princes Freeway connection to the CBD, and the Pakenham train line 2.

Housing affordability is strong. At the time of purchase, three-bedroom houses on 600-square-metre blocks were trading between $700,000 and $850,000. That puts the suburb firmly in the affordable-family-housing category, which means tenant demand is genuinely structural — these are not discretionary renters who will move home to their parents if the market shifts.

The land value composition matters too. At $750,000 for a 600-square-metre block, the land component sits well above our 80 percent minimum threshold. The structure on top is a depreciating asset. The land underneath is the wealth engine. This is the fundamental distinction that separates property investors who build wealth from those who just collect rent 3.

Vacancy rates in the Casey corridor have been running below 1.5 percent for the past three years. When we list a property for rent in this pocket, we typically receive fifteen to twenty-five applications within the first week. That kind of demand gives us pricing power that simply does not exist in oversupplied markets.

The conversion: what $80,000 actually bought

The property was a standard four-bedroom, two-bathroom house. Good bones. Nothing architecturally special. The layout had a natural separation point — the rear of the house had an existing living area, bedroom, and bathroom that could function semi-independently with some modifications.

Here is what we did:

We added a second kitchen in the rear section. Not a kitchenette — a proper kitchen with full cooking facilities, compliant with Victorian building standards. This single addition transforms the property from a four-bedroom house into two independent living spaces 4.

We installed physical separation between the two sections. Not just a locked door — a proper wall with acoustic insulation. Each section has its own entry point, its own mail receptacle, and its own utility metering where feasible.

We added a laundry to the rear section. Small footprint, stackable washer-dryer, tiled floor with proper drainage. Basic but functional.

Total conversion cost: approximately $80,000. That includes the building permit, the building surveyor sign-off, materials, and labour. Our in-house renovation team handled the work, which keeps costs dramatically lower than going through an external builder 5.

The critical point: we did not add floor area. We did not extend the roofline. We did not change the external footprint. All modifications were internal. This is important because internal modifications generally do not require planning permits from council — only building permits from a registered building surveyor. The approval pathway is simpler, faster, and cheaper.

The rental outcome: $1,200 per week, broken down

The front section — three bedrooms, one bathroom, kitchen, living area — rents for $700 per week. This is broadly in line with market rate for a three-bedroom house in Narre Warren.

The rear section — one bedroom, one bathroom, kitchen, living area — rents for $500 per week. This is a premium rate for a one-bedroom dwelling, justified by the fact that it is a self-contained unit with its own entrance, not a granny flat out the back.

Combined: $1,200 per week. $62,400 per year 6.

Against a total investment of approximately $880,000 ($800K purchase plus $80K conversion), that is a gross yield of 7.1 percent. After rates, insurance, management fees, and maintenance, the net yield sits around 5.5-6 percent.

For context: the average Melbourne rental yield is 3.1 percent (CoreLogic, December 2020). Our property is yielding almost double the market average. And unlike a property that achieves high yield through being cheap and in a terrible location, this one is also appreciating at 8-10 percent annually because the land value is genuine 7.

The mortgage repayment on an $880,000 loan at 80 percent LVR (so $704,000 borrowed) at 2.5 percent interest (the prevailing rate at time of writing) is approximately $680 per week on a principal-and-interest basis. The rental income of $1,200 per week covers the mortgage, covers all holding costs, and generates positive cash flow from day one.

That is the whole game. Buy an asset that pays for itself, sits on appreciating land, and generates surplus cash that can be saved toward the next deposit.

What this is NOT (and why that matters)

I need to make something clear because I get this question constantly: this is not a rooming house in the traditional sense. We are not renting individual rooms to strangers who share a kitchen and bathroom. That model — seven to nine unrelated people in a single dwelling — is a management nightmare that I would not wish on any property manager, including my own team 8.

I have done it. I have managed properties with per-room tenancies. The turnover is relentless. The conflict between housemates is constant. The wear and tear on the property is three to four times higher than a standard tenancy. And the last room — invariably room seven or room eight — never fills because nobody wants to live in a house with that many strangers.

What we do instead is a dual-occupancy conversion. Two independent households. Two leases. Two sets of tenants who never interact because they have separate entrances and separate living spaces. The management load is equivalent to managing two normal rental properties. Which, functionally, is exactly what it is.

The rental premium exists because each section offers self-contained living at a price point below the cost of renting a standalone house. The front tenant gets a three-bedroom house for $700 per week instead of $800 per week. The rear tenant gets a private one-bedroom dwelling for $500 per week instead of paying $400 per week for a shared house. Both tenants are getting a deal. Both are likely to stay long-term. And we are collecting $1,200 per week total instead of the $650 per week we would get from a single tenancy 9.

Can you replicate this? The honest answer

Yes, with caveats.

The property needs to have the right layout. Not every four-bedroom house has a natural separation point. You need a rear section that already contains (or can easily contain) a bedroom, bathroom, and living area with independent external access. The kitchen and laundry are the additions — everything else needs to already be there or close to it.

The block needs to be large enough. On a 400-square-metre block, you do not have the external space for a separate entry path to the rear. Six hundred square metres is our minimum for this strategy. Most of our conversions have been on 600-650 square metre blocks in the southeast 10.

You need a building surveyor, not a planning permit. As long as all modifications are internal and you are not changing the building's external footprint, you go through the building permit pathway. This is faster (four to six weeks versus three to six months for a planning permit) and has a much higher approval rate.

You need a renovation team that has done this before. The kitchen installation, the wall construction, the acoustic separation, the plumbing for the second laundry — these need to be done to code. An inexperienced builder will miss something, and a failed inspection means rework at your cost. Our in-house team has completed dozens of these conversions. The process is templated 11.

And you need a property manager who understands dual-occupancy tenancies. Two leases on one title is unusual. Your PM needs to manage them as two independent relationships with clear boundaries. At PremiumRea, our Leasing PMs manage a maximum of 50 properties each — not the industry standard of 170. That density of attention is what makes dual-tenancy management work smoothly 12.

The strategy is replicable. It is not simple. There is a difference between those two words that a lot of property educators gloss over. But if the layout works, the block is big enough, and you have the right team, the numbers speak for themselves.