Top Reasons Why Granny Flats Are a Great Idea

Why Granny Flats Have Risen in Popularity Recently

Granny flats have been rising in popularity in recent years, most likely due to rising housing prices. With the average home price in the Sydney sitting at nearly $1,000,000, and well over $900,000 in the Melbourne, it's no wonder this isn't an option for many people.

What is an option, however, is building an accessory dwelling unit (ADU) on an existing property. This keeps families close together and helps cut back on housing or nursing home costs.

If you're thinking about building a granny flat but aren't sure about doing so, we understand. To help convince you that you're making a good decision, let's take a look at the top reasons why you should build a backyard granny flat.

What Is a Granny Flat?

A granny flat, also called an in-law apartment or a backyard house, is an extra space on your property. The space is used for housing elderly relatives or live-in nannies. It can also be used for housing guests.

Granny flats can be built on any part of your property, including in the basement, in a converted garage, or as a separate structure. Either way, it makes for a cozy and convenient space for families to utilize.

Why You Should Build a Granny Flat

With a granny flat, you can utilise (and potentially even monetise) every inch of your backyard. Whether you want to create some long-term rental accommodation, an AirBnb retreat or a cost-effective living solution for family members, there are many reasons to invest in a granny flat.

See for yourself below!

Earn a Cool 10-20% ROI

It's becoming harder and harder to hunt down affordable housing as property prices continue to rise across Australia. The good news is that granny flats are a cost-effective solution for investors and tenants alike!

Not only do they offer affordable housing to renters in sought after suburbs, but granny flats can also generate an average return on investment of 10-20% for their owners. As well as being a wallet-friendly alternative to purchasing an entirely separate investment property, building a granny flat in your backyard could reel you in up to $20k per year.

Categorised as secondary dwellings, these compact and comfortable homes can be built on the same plot as a principal residence. Live in the main house and lease out your backyard accommodation or vice versa. Or take it one step further and maximise your earnings from a single site by adding a granny flat to an existing rental property.

Still not convinced? According to flatmates.com.au, the weekly asking rent for a granny flat has recently risen to 5.95% – a higher rate than both houses (3.9%) and apartments (1%).

Have a play with our return on investment calculator and learn what you could earn!

Generate Cash Flow with Granny Flats

Building a granny flat has the potential to transform your property from negatively to positively geared. Sound appealing? Many granny flats are earning a surplus of over $20,000 per year.

• Two Bedroom Granny Flat, how you can make an extra $20,000 per year.

Boost Your Overall Property Value

Whether you're planning to lease out your granny flat, use it as a guest house or leave it to the teenagers, this new build can boost the value of your property up to 30% (provided it sticks to council regulations). That's a pretty big bonus if your aim is to sell down the line!

Adding more bedrooms to your property is almost always going to be a smart move when it comes to your property valuation. But a granny flat takes this improvement to the next level. Instead of simply extending your primary dwelling, you get a whole other self-contained home that can earn you some extra income on the side before you sell.

Gain Granny Flat Depreciation Entitlements

Depreciation allows you to claim the gradual wear and tear of your granny flat (including its construction elements and fittings) as a tax deduction. The ATO (Australian Taxation Office) sets minimum depreciation rates, with granny flats qualifying for a minimum of 2.5% annually.

• Benefits:

This deduction lowers your taxable income, potentially leading to significant tax savings.

Estimates suggest an average granny flat can see deductions in the first year around $5,288, accumulating to over $23,000 in the first five years.

• Things to Consider:

The actual depreciation rate can be higher than 2.5% depending on the construction materials and specific features of your granny flat.

A quantity surveyor can assess your granny flat and provide a detailed depreciation schedule to maximize your deductions.

Start Earning Sooner with Quick Approvals

Thanks to the newest policy, granny flats in New South Wales and Vitoria can be approved without the owner needing traditional council development approval (subject to meeting set criteria). This saves you time and Money Spaces will prepare and submit all that is required to the Private Certifier to get the project underway.

In other words, by securing a Complying Development Certificate instead of a dragged-out Development Application, you can skip the time and stress of waiting for your investment project to get underway. And the sooner construction begins, the earlier you can start earning a return on its end result!