Extra income and maintaining a safe distance are the key balancing acts if you’re deciding to add a granny flat to your property.
Adding a granny flat could increase your home’s value by 30 per cent and add about 27 per cent to rental income, according to a 2019 CoreLogic/Archistar Granny Flat Report.
“Building a granny flat is becoming an increasingly compelling proposition for homeowners … Not only can it help to manufacture new capital gains, but it has the potential to generate rental income while meeting demand for more affordable housing,” says CoreLogic’s Head of Research, Tim Lawless.
He adds that a granny flat typically rents out for less than the price of a standard apartment, making it an attractive and affordable option for renters on a budget.
Potential pot of gold
“Many homeowners are sitting on a pot of gold in the form of excess land that could be developed to generate a new income stream. This has wider economic benefits for renters who want to access popular suburbs without paying a premium,” says Archistar co-founder Robert Coorey.
The report adds that capitalising on this untapped potential for additional dwellings could also deliver far-reaching economic and social benefits, including greater employment opportunities for builders and other tradespeople.
Industry experts advise that it is important to use value-adding property investing strategies to generate capital growth and increase cash flow in your portfolio.
If orchestrated and constructed correctly, granny flats are considered a value-adding strategy designed to develop your wealth creation.
Construction approval and building on quality
Most owners, renters and builders know that granny flats differ markedly in quality, size and style.
Council approval is generally not required to build a two-bedroom granny flat, however, in most cases, you will need development approval and/or a complying development certificate. Check the requisite government specifics in your state or region.
If you build it, will they come? It’s important to choose the right builder and construct the granny flat to fulfil its main objectives. Research median values, regional demographics and rental demand/estimates.
Poorly located or constructed granny flats may not attract a good tenant or rental return — so it is worthwhile to spend extra in order to enhance quality in your investment.
Multi-use flexibility
Of course, the major benefit of owning a granny flat is the rental income it can generate — but also the lifestyle flexibility.
A self-contained granny flat offers independence and much-needed space for maturing householders and visitors.
Not only can it provide convenient accommodation for in-laws or children to utilise, but you can also profit handsomely over the long term when required.
Make a profit by renting the granny flat out when extra income is needed. This will significantly augment your rental yields.
Don’t forget to consult quality estate agents for rental plans/strategies and property management.