Yes, you can rent out a granny flat. In fact, it’s never been easier. As the rental market continues to tighten in WA, renting out your granny flat is a great way to earn some extra income. But renting out a room or granny flat in your home can have tax implications and there may be local regulations that you need to adhere to also. Here at Granny Flats WA, we have a wealth of experience in how to turn a granny flat into a financial asset.
Do you need council approval?
You do not need council approval when renting out a granny flat, as the Cook government relaxed the rules regarding rentals in 2024 in order to stimulate a stretched market. However, in Western Australia, the person renting your granny flat is likely to be considered a tenant under the Residential Tenancies Act 1987, so make sure you understand your rights and responsibilities as a landlord.
You must also make sure that you have the appropriate building and planning approval before it’s rented out. If you are building, ensure you get the right checks and approvals. If you have bought a home with a pre-existing granny flat, you can check your sales documentation with your local council to make sure the granny flat has been approved.
How do you rent out your granny flat?
Once you’ve checked that the structure itself has been approved, renting out a granny flat is like renting out any kind of property. You need to decide what kind of rental you want the property to be, what kind of tenant you’re looking for, and the price range you think the property is worth.
Decide if you want short-term or long-term tenants
Your first consideration is whether you would prefer to have a short-term tenant or a long-term tenant.
There are advantages to both; a short-term tenant allows you to take breaks from renting out your granny flat if you would like a break or may have family or friends coming to stay. There is no shortage of people looking for short-term lets, whether it be for student accommodation, for those waiting for renovations to finish, or those who may have family visiting from abroad.
If you would prefer longer-term financial stability and reduced administration (each new tenant will need vetting and may have individual requests regarding the accommodation), a long-term tenant might be better suited to your granny flat.
Can I AirBnB?
Granny flats can be listed on AirBnB. The advantage of this type of listing is that AirBnB will complete a guest verification and reservation screening on your behalf, as well as offering some protection against damage. The disadvantage of renting a granny flat on AirBnB is that you will lose some of the revenue from renting out your granny flat in administration fees.
What are the tax implications?
The tax implications for owning and renting out a granny flat will vary, depending on where you are located. If your granny flat is occupied by a family member, rather than rented out as part of a commercial agreement, and no income is drawn, there will be no tax liability on it. If, however, you draw a rental income by renting out your granny flat, you must report the income on your tax return and it could be liable for tax.
On the plus side, you might also be eligible for specific tax deductions, on expenses such as mortgage interest or the costs associated with running a granny flat, like repairs, landscaping, cleaning and pest control, agent commission, or mortgage interest payments.
Make a rental listing
Once you’ve decided what type of rental you want your granny flat to be, it’s time to make a rental listing. You can go through a property manager or rental company or do it yourself.
If you are doing it yourself, you will need to research rental prices for properties with similar characteristics to yours and the general rental prices in your area. This will give you a fair comparison for the price you should be charging. You should then list everything you expect from a renter, including rental price, whether pets are allowed when the property becomes available and so on.
You will also need to think of an engaging description on the listing to attract the type of tenant that you want. This is where you can detail what kind of tenant would be well-suited to the property, as well as the benefits to the rental beyond the actual living space. These benefits could be proximity to things like cafes, shops and parks or good public transport options in the area. Your listing will need pictures of the rental so use good lighting and a high-quality camera to make the pictures look attractive and clearly show the details of the property. Make sure to clarify whether the granny flat is attached or detached in your listing.
Protect yourself
Protecting yourself and your property is a vital part of renting a granny flat. Make sure you employ a reputable agent to conduct thorough background checks on your tenants, or undertake the process yourself. You will want to check their rental history, their credit history and whether they have a criminal record to get a thorough picture.
Implementing a comprehensive lease agreement, which clearly outlines the terms of the tenancy agreement and who is responsible for maintenance (particularly of outside spaces), utilities and other bills. You should also ask for a deposit to protect yourself.
Don’t forget the importance of insurance too. Investing in landlord’s insurance can protect your granny flat against unexpected events. No matter how good your tenants are, accidents can happen, and landlord’s insurance offers you a level of cover. We would also suggest removing any personally significant or valuable items from your granny flat before you let it out.
Things to consider
Good communication is vital when it comes to successfully renting a granny flat. Make sure both you and your tenant agree on expectations, particularly around contentious issues.
- Utilities
It needs to be clearly defined, preferably in writing, which party is responsible for utilities. Remember your credit rating could be affected by non-payment at a property you own. Having a written record helps keep things clearly defined, and provides a written audit, should one be required.
- Inspections
Agree on when and how often you will carry out inspections. Regular inspections help reassure you about the condition of your property, as well as providing your tenant with a framework.
- Termination of tenancy
Consider how you want the tenancy of your granny flat to end. Some landlords prefer to give tenants a fixed term, which expires as soon as the date is reached. Others might prefer a contract that can then roll on. Do remember that you should give your tenant a notice period before terminating the tenancy, even if the lease has expired, in order to give them time to find another property.
Contact us
If you’re not planning to sell your property soon, then renting out your granny flat is a great idea. The rental market is extremely stretched. There are also a number of people building, who might be looking for a short-term let while they wait for their renovation to finish. If you choose your tenant wisely, a granny flat can be an excellent way to earn a decent, long-term income. If you don’t have a granny flat, it might be worth building one if you have a suitable property. That’s where we can help you. Contact us today to see if Granny Flats WA could help create your perfect custom-designed granny flat.
