Australians are in love with granny flats, and why wouldn’t we be? They provide a secondary income, they can be low cost and they should increase the value of your home right? We have seen the popularity of granny flats soar in recent times as Australians look for smarter investment options or better ways of utilising their current land. As Australia’s population increases with overseas immigration as does the demand for homes and what better way to utilise your existing land than to build a granny flat and rent it out.

A granny flat is a self-contained housing unit that’s built on the same block as another single -family house. It’s basically a second dwelling with amenities to accommodate one or two people. Granny flats must have cooking facilities, living spaces, sleeping spaces, toilet and shower facilities to be considered a true granny flat.

There are many benefits of a granny flat, like converting your backyard into living spaces for your kids (let’s be honest here, children are taking longer to move out of home these days), grandparents and relatives. A granny flat will also increase your rental income potential, which means more money to pay off your loan faster or more money in your pocket. It all sounds great and granny flats can be a great investment, but there are some factors to consider when deciding on building a granny flat.

It’s important to consider whether the granny flat will actually increase the value of your home because even though you may spend up to $125,000 to build a granny flat, it doesn’t mean the value of your property increases by at least that much. This is because not everyone wants to buy a home with a granny flat, especially if they buying the property as their family home. The second point to consider is how long it will take to rent you granny flat. This is something people think will happen as soon as you finish the granny flat, but sometimes it takes a while to find a suitable tenant as there is only a certain amount of people or certain demographic that would want to rent a granny flat. We see this happen in suburbs where granny flats are not common. There are also tax implications around the rental income you earn and if a portion of your home now gets considered as an investment, so there may be capital gains tax payable when you sell.

I guess just like any investment decision, deciding to build a granny flat needs careful consideration on whether it’s the best investment for you. I am happy to run through the numbers with you if you are considering a granny flat for your property. Just click here and send me an email.

“There is no decision that we can make that doesn’t come with some sort of balance or sacrifice.” – Simon Sinek