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Should I Buy a Granny Flat?

If you own a house and want to earn income, you could build a granny flat in your backyard. It would not only boost the value of your house but also is a good option to earn rental income.

A granny flat is an independent unit of residence. People normally build granny flats for older parents and family, but can also rent it out. However between the states there are variences, for example, in Victoria, homeowners can only rent it out to their dependents.


Can You Build A Granny Flat On Your Block?

Policies to build these flats are different in each state; they also vary from one council to another. Normally, people want to know if they can build these flats, and the answer in most cases is yes, they can. But the guidelines of each Council vary, which can make it hard to figure out what a person can and cannot do. For example, in New South Wales, laws allow people to build and rent out granny flats. However there are also councils that charge a contribution fee of about $20,000, which keep people from building them.

When you plan to build a granny flat, you must consider every element, such as drains, sewers, and other easements. On some occassions there can be a conflict with the underground layout if these details are not planned in advance.


Compliance with Building Code

These flats should comply with the Building Code of Australia and any other relevant standards. Granny flats have proven to be very popular in Sydney due to:

  • A good return on investment
  • Affordability crisis in a housing sector.

In Sydney, rental return can be up to $720 per week with a two-bedroom granny flat, while the total cost of a two-bedroom flat with a bathroom and a kitchenette is around $130,000.


Benefits of a Granny Flat

Below are some of the benefits of having a granny flat:

  • If you rent it out, it allows you to earn extra money rent-wise.
  • You can claim on your depreciation plan if you rent out a granny flat.
  • As discussed, a granny flat increases the value of your house, which is good for both real estate investors and owners.
  • It allows you to spread the income risk. For example, you will not be making any money if you have an investment property and nobody is living in it. But if you build a granny flat, it is highly likely that you would be earning money on any one of the two.
  • It can be a great addition to accommodate your family. Your grown up children or parents can use it in times of need.


Risks of Building a Granny Flat?

You also have to understand the risks of building a granny flat before working on your plan. Below are a few risks associated with it:

  • Although, you need to have an estimated the cost of building a granny flat, there often can be an unseen or unexpected cost, which may exceed your budget.
  • Not every council allows you to build a granny flat.
  • Granny flats may also decrease the resale value of your house because it’s not always an ideal add on for new home owners . Tenants also don’t always appreciate granny flats as they do not want to have another tenant in the backyard. It normally is a good option for the real estate investors though.

If you wish to build a granny flat, doing your market research is important. Make sure the council or state allows you to build it and also keep in mind the demand for these flats in your area.

Chat to Hunter Galloway today about building a granny flat on 1300 088 065 or email Nathan at

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