Rooming House Conversions vs Custom Builds: Which Is Better?
When it comes to investing in Rooming Houses everyone wants an 10% return as quickly as plausible and conversions are the fast lane.
Converting an existing residential property into a compliant Class 1B rooming house is typically 4-5x faster and significantly more cost-effective than undertaking a ground-up custom build.
In most cases, a well-positioned suburban home can be fully converted, registered, and tenant-ready in as little as 45 days — while custom builds often take 12–24 months from land acquisition to your final occupancy permit allowing any tenant to move-in.
Beyond speed, conversions allow investors to tap into blue-chip, in-demand suburbs where custom builds are often completed where land is cheap but demand is way down.
Going down the conversion path not only means your property isn't just finished sooner — it’s located in established, high-demand rental zones with proven tenant flow.
Here’s how the numbers stack up:
| Feature | Conversion | Custom Build |
|---|---|---|
| Turnaround Time | ~45–60 days | 12–24 months |
| Average Setup Cost | $30K–$100K* | $450K–$850K* |
| Return on Investment (ROI) | 80%–120% in Year 1 | 20%–30% in Year 1 |
| Location Flexibility | Inner & middle-ring suburbs | Growth corridors or fringe areas |
| Vacancy Risk | Low — proven demand zones | Moderate — speculative demand |
| Compliance Pathway | Class 1B upgrade + fire safety | From DA to build to registration |
| Average Time to Sell Asset | 30–60 days (standard housing stock) | 6–12+ months (niche investor market) |
| Ability to Retrofit Back to Standard Property | High — revert to family home | Low — requires knockdown Custom builds, while potentially offering design flexibility, are subject to significant planning delays, builder shortages, and capital tie-up — all of which can delay ROI and reduce your annualised yield. Building in ring suburbs have higher vacancy rates, higher volatility of tenants and overall less demand for accomodation. If you want to generate strong yields sooner, avoid extended construction risk, and invest in proven, in-demand locations, rooming house conversions are the smarter, faster, and more strategic choice.Previous
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