Looking at the pros and cons of investing in a granny flat
Australia’s housing affordability issue shows no signs of slowing down. Investors can take advantage of this by providing low-cost housing. Creating a “granny flat” is one way to use extra space in your own home to earn money. You can also add a granny flat as a separate building. Before you do, you should know what they are and the pros and cons attached to granny flats.
What is a Granny Flat?
A granny flat is a secondary home. As such, granny flats are living spaces built on the same land as a main dwelling. A granny flat is a self-contained space and most contain their own bedrooms, kitchen, bathroom and general living spaces.
Investors have some choices in how they build granny flats. Some build a separate building, whereas others build an extension to the main property.
At the moment, property owners in South Australia, Queensland, and Victoria may not rent out granny flats to generate income.
Investors can build granny flats and rent them out in all other areas of Australia. Some regions, such as New South Wales, have even made the practice easier.
Let’s assume you can build a granny flat. What regulations do you need to keep in mind?
Each state has specific guidelines to follow. You should talk to an expert or the local council to find out more about what these are.
On a more general level, granny flats must meet the following requirements:
• The flat is on property that already has zoning permission for residential use.
• It is the only granny flat attached to the property.
• The land area of the property as a whole is at least 450 square metres.
• The person who owns the primary dwelling must also own the granny flat.
• The living space may not exceed 60 square metres. This figure may vary by state.
• The granny flat must have its own access point with no obstructions.
The Pros of Granny Flats
Investing in a granny flat brings with it several advantages, including the following:
• Affordability: Granny flats are usually less expensive than other investment properties. They allow investors to build property portfolios without lots of capital outlay.
• Adding Value: Investors can add value to the main property using a granny flat. This can prove a bonus when selling the home.
• Income: A granny flat will earn a regular weekly income. How much this will be varies depending on the flat’s size and location.
• A Spare Room: Even if you don’t have a tenant, a granny flat can prove useful. You can use it as a comfortable space for visiting friends and relatives.
The Cons of Granny Flats
Granny flats are not without their disadvantages. There are two you need to keep in mind:
• Unexpected Costs: Granny flats have the same pitfalls as other construction projects. You may get hit with unexpected costs along the way. Make sure you have money saved to cover them.
• Tenants: You may have to deal with tenant complaints. As the granny flat is on your property, this can create some difficult situations.
Your Next Step
The information in this article is general in nature. Before moving forward you should seek professional help to find out more. To find out if you can refinance your home loan in order to build a granny flat, contact a uno adviser.
This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.