Let’s start by separating the stigma attached to the words ‘granny flat’ and removing the stereotypical visual of your mother-in-law living in a red brick eyesore, within 50 meters from your private sanctuary, and start thinking about the dollars your backyard could be raking up!
Then you will begin to understand why granny flats are growing in popularity among savvy property owners and investors.
Need more convincing?
A large backyard can be a great investment opportunity, generating additional rental income for a relatively low cost, from previously unused space. It’s the easiest way to get into the investment market and get closer to financial freedom, by maximizing your returns.
Relatively low build costs – approval for granny flats in NSW is generally quick and easy and costs between $110,000 and $200,000 to build one, depending on the finish and access to the building site.
Granny flats on the Northern Beaches are fetching between $500 and $700 per week, commonly achieving 26% rental yield.
The government has projected single-person households as the fastest growing area over the next 20 years. With an addition of a granny flat, you can reap the benefits of starting with a positively geared investment, removing the fear of taking the leap into property investments.
A granny flat can provide homeowners with their own rental property, without putting them in substantial debt, all within the ease and comfort of their own backyard.
Note that even though a granny flat will add value to your home, owner-occupiers should be aware that building on the same property title as the primary residence, and renting out a secondary dwelling will affect their capital gains tax exemption when it comes time to sell.
Because granny flats are so flexible, they represent extra value for lots of buyers:
- A home office is becoming increasingly the norm and finding that space away from disruptions is gold.
- You might decide that your teenager is ready to move out but not able to support themselves financially – the perfect place for independent living but still under mum and dad’s radar!
And of course, you can use it for relatives for long stays, or even grannies!
There are a couple of different ways to borrow for a granny flat. One way is to use a construction loan, where you’re borrowing against the property value of the property post construction. We explain how this works here