If you have extra space in your backyard, you may have considered maximising this area by building a granny flat to bring in some extra income. It may be easy to decide you’d like to build one, but it’s important to do your research to do it right.
What exactly are granny flats?
Granny flats are a small unit or apartment that is independent of the main house or has a connecting door from the inside for easy access. They’re generally defined as ‘secondary dwellings,’ which means they’re built on the same lot of land as the main house. They typically have separate entrances, as well as their own bathrooms, kitchens, bedrooms, living spaces and laundry areas.
Who wants to rent one?
These properties used to be used solely for putting up elderly relatives who wanted to be close to family, rather than turning them over to an aged-care facility. But with the return of multi-generational living arrangements and the need to have an extra source of income has made them a necessity for many.
In fact, they’re the perfect solution for students wanting to save money, aging parents needing a little support, tenants wanting to save for a home deposit and even homeowners who want to be able to pay off their mortgages.
What are the pros of investing in a granny flat?
They can be affordable: It’s typically cheaper to buy or build this property type than it is to buy or build a standalone investment property. Long story short, investing in one of these properties could enable you to launch your first investment portfolio without needing to borrow a heap of money.
They can add value: If you erect a legally-compliant property in your backyard, this can work in favour of your property’s total value.
Extra rental income: The amount of extra income is going to depend on the location of your property (as well as how swish your flat is), but this extra building could potentially provide you with a few hundred dollars of extra income each week.
It’s pretty practical: Sure, they’re an investment for your wallet, but they’re good for more than that! Even if you’re between tenants, you’ll be able to provide useful accommodation for friends or relatives who need a place to stay, easing pressure on space inside your house.
What are the cons of investing in one?
You may not love your tenant: If you choose to lease your external property, you will be taking on a tenant who you may or may not love. Don’t forget to do the necessary legwork in advance to make sure you’re renting to a tenant with solid references and no blacklisting history to avoid potentially tense situations.
Potential unforeseen costs: Constructing one of these properties may cost more than you expected. Don’t forget to put aside additional funds to meet any expenses outside of your initial budget.
State and territory legislation: You need to check with your state and territory regulations when it comes to building and leasing. You may find that you cannot rent it out at all, and may only be able to use it for yourself. They may be rented out in NSW, WA, the NT, TAS and ACT, but cannot be offered as rental apartments in QLD, VIC and SA.
Potentially longer vacancy periods: Even though the rent may be lower, you could face a longer-than-average wait while you search for a tenant. Many house hunters won’t choose this option because they’re concerned about the potential for disputes and loss of privacy.
Make sure you do your research
There are always pros and cons to adding a granny flat to your property, so ensure you get plenty of financial and legal advice before you go any further. You should consider the cost of your existing home to decide if it’s worth the money or not, especially if you’re planning on selling soon. With many things to consider, research, planning and asking for good advice before you build is essential to a successful end project.