Building a granny flat is generally a wise investment. Their versatility gives them several benefits. They can house relatives, elderly parents or adult children. Granny flats add value and can also be rented out for high financial returns, while increasing your property’s overall value.
What is a granny flat?
A granny flat is an independent dwelling that occupies the same block of land as an existing or main house. Granny flats are often classified as ancillary or secondary dwellings, as they can not exist independently of the main home.
While they must exist on the same block of land, granny flats can be detached or attached to the main dwelling. The owner of the land must ensure that granny flats have independent entrances and their own separate utility supplies.
When building or renting out a granny flat, owners must abide by the general requirements for rental properties.
Can I build a granny flat on my property?
You can build a granny flat on your property if you meet the criteria and attain the necessary approvals. The basic criteria for building a granny flat is that it is constructed on a block of land with a house on it while abiding by size and setback requirements.
Beyond this, the main approval necessary for building a granny flat is building approval although council approvals related to the size of your granny flat have been abolished by the Cook government to boost housing supply. Which means most necessary approvals relate to the building process itself.
By ensuring your granny flat follows the appropriate building codes, you avoid creating risks to health and safety. A qualified granny flat builder is aware of these codes and follows the necessary precautions for a safe build.
What does it cost to build a granny flat?
How much it costs to build a granny flat will depend on a number of factors. Like building an investment property, you will have to choose the size and spec of the flat itself, which will have an impact on costs.
On average, a granny flat is likely to cost between $100,000 to $200,000, depending on where you’re building, how big it is and the design and materials used.
Additional costs for permits, utilities and landscaping may also apply, although legal amendments have eliminated council planning approvals and only require building approvals to be submitted.
There are several different types of granny flat to consider when building. How much to build a granny flat may initially depend on whether you’re choosing to build a detached granny flat, or extend your existing home.
Different types of granny flat
You could build an entirely separate, detached granny flat on your plot. This would typically have one or more bedrooms, living area, kitchenette or full kitchen and a bathroom. The advantage of an entirely separate granny flat is that it’s self-contained, allowing its occupants privacy and independence, which could be desirable for both family members and tenants.
Another option would be to add a granny flat onto your existing property. While this type of flat would usually have its own entrance and facilities, it allows for the sharing of some facilities with your primary dwelling and reduces the separation between households. This can also reduce granny flat costs.
Does a granny flat add value to your property?
While it is a good investment, it’s hard to quantify how much value a granny flat adds to your property, due to the number of variables. Building a granny flat definitely will add value in the following ways.
Rental income
You can choose to rent out your granny flat, either as a long-term or a short-term let. Granny flats provide a high rental yield due to their low upfront costs.
Property prices are high, making granny flats appealing to renters looking to save. To rent out your granny flat, you must make a rental listing. You can do this on your own or through a property manager. It will have to include the specifications of the granny flat and the expectations for potential tenants.
Granny flats are popular rentals for several demographics, including students, retirees and young couples.
Tax depreciation
If you build a granny flat, you can claim a deduction for the decline in the value of the building and its fixtures and fittings over time. This is known as tax depreciation and can make a big difference, particularly if you are renting out the granny flat and drawing an income from it. You will need a qualified quantity surveyor to assess your granny flat and draw up a depreciation schedule.
Boosts house prices
A granny flat adds value to your home by increasing the amount of liveable space that you have. They are also growing increasingly attractive due to the high cost of living forcing adult children into remaining at home for longer.
Are there any considerations when building a granny flat?
Just as with any investment property, there are a number of things you have to consider before you build a granny flat to ensure that you maximise your investment and end up with a home that you’re happy with.
Consider your budget
The first thing to do is consider your budget. While a granny flat can be an economical way to add value to your home, it’s important you factor in all the hidden extras, such as utilities or landscaping to make sure you don’t run over budget.
While granny flats are in high demand as rental properties, you must ensure you can cover the costs during any periods when it remains empty, or home to a family member not paying rent.
Consider its use
This brings us to the next consideration; what do you really intend to use your granny flat for? This is important for two reasons – firstly, whether or not you intend to rent it out or keep it for personal use may dictate your design and lead you to invest in more high-quality fixtures and fittings.
If you are looking to draw a rental income from your granny flat, opt to increase the number of bedrooms in the design. Alternatively, if you anticipate your granny flat being home to older relatives, you will need to consider whether your granny flat will need modifying with rails and ramps in case of declining health.
Another option is to repurpose your granny flat design to incorporate a home office or separate living space for kids (or adults). Office pods and tiny houses are also an effective property investment, if you’re considering adding a granny flat to your plot.
In addition to design considerations, the intended use of your granny flat will impact your budget as well. Drawing an income from the property may allow you to increase your building budget. On the other hand, knowing that it’s being rented out might make you decide to spend less on fixtures and fittings in case of wear and tear.
These are all things to consider before you begin your project.
Consider your privacy
While having a member of your extended family close to home might seem like a wonderful idea in theory, you need to consider your privacy. Have you thought about how it will be to have someone close enough to be a part of your daily life? Is that likely to have an impact on your own family dynamics?
Making sure that both you and whichever member of your family is likely to move into the granny flat have the same ideas about personal space and availability is one way to reduce tension.
If you intend to rent your granny flat out, you still need to consider how much privacy you want. Setting some ground rules with the tenant or even opting for some design features or landscaping that clearly separate the two properties is another way to make sure both parties can co-exist happily.
Consider on-going costs
If only the costs associated with a granny flat finished when the build did. Don’t forget you need to factor in ongoing costs, such as utilities (if you are not planning on charging the inhabitants of your property to live there), council tax, and ongoing maintenance issues.
It’s important to have money set aside to cover these kinds of ongoing costs, as well as unexpected costs you might incur, like replacing appliances or property wear and tear.
Consider tenancy issues
Finally, if you choose to rent your granny flat out, you need to decide how you’re going to manage the tenancy. From finding a tenant to checking references, and setting the right price, there are many steps to go through to ensure that you get a trustworthy tenant.
If you don’t feel comfortable managing the process yourself, appointing a managing agent or realtor is a good way to ensure that you get a safe and reliable tenant.
Are granny flats a good investment?
Building a granny flat is a great investment. Not only can a granny flat increase the value of your home in the long-term, but it also allows you the opportunity to make a passive income. And, for those with extended families, there’s the opportunity to strengthen family ties and either spend more time with older family members, or give adult children a place to live while they save for their own home.
Granny flats can also be extremely cost-effective. They have a much lower upfront cost than full-sized houses, making them an affordable building option. They’re also incredibly versatile and capable of suiting your needs, whatever they may be.
While you may be daunted by the building and approval process, there’s no need to fret. A reputable builder like Granny Flats WA will take responsibility and guide you through each step of the journey.
Chat with one of the Granny Flats WA team members to see if we have a granny flat that suits you. You can also view some of our designs here.
