The addition of a granny flat can be a great option for a number of reasons. So, if you’re trying to find a house with a granny flat to rent, read on.
Many Australians are taking advantage of the extra space and using them as a teenager’s retreat or more traditionally, as a home for aging parents or relatives.
Furthermore, granny flats are allowing more home owners to become property investors and make extra money from the additional space.
The owners may either live in the granny flat themselves and rent out the main home to gain a larger source of rental return or rent the granny flat out to supplement income through its rent.
There are pros and cons to building a granny flat, as there is with any large investment.
Let’s take a look:
1. The costs can exceed expectations
This is true of any new build of course but with a granny flat there are some specific things you should take into account.
While you may save money by using land you already own, there will be costs involved with council permits and planning.
Also consider that your existing house may cause access problems during the building of the granny flat so additional costs for cranes or other machinery and equipment may be incurred.
Also be mindful of how connecting to services such as electricity, water, sewerage and storm water will impact upon your bills and how you’ll manage this.
2. Property management
If you are planning on renting out your granny flat or existing home, you may consider the use of a property manager.
This is likely to be the best approach given that you’re likely to be living very close to your tenants and you definitely want to be able to keep away from the day to day management itself.
Alternatively, if you decide to rent out both properties, being the owner of two investment properties can be a lot to manage, particularly in terms of maintenance.
This professional service does however come at a cost so when doing your cash flow analysis this needs to be taken into account.
3. Account for periods of vacancy
As with any investment property, it’s always a good idea to allow for periods of vacancy when doing your cash flow analysis. As a general rule allow for at least two weeks of vacancy per year.
If you aren’t able to manage the additional mortgage costs that a granny flat will bring, it may be a good idea to wait.
4. Additional income
If you do use either or even both properties as an investment rather than for your family alone, a granny flat is a great source for additional income.
Especially with a newly built property, there is likely to be less maintenance issues for the first few years at least.
An additional $200 plus per week can lead to quite a chunk of money paid off a mortgage at the end of the year or even a great overseas holiday if you prefer.
This additional income brings you many options in terms of finances that may otherwise not have been available.
5. Boosts re-sale value
A well built granny flat can boost the re-sale value of a home simply due to the potential it brings.
It offers additional living space, a work from home space and of course potential income through renting the flat out.
6. Granny flat legislation
Be mindful when doing your research that there are specific legislative regulations that differ from state to state.
New South Wales for instance made getting granny flat approvals even easier in recent years to help with housing demand but there are requirements about what exactly constitutes a granny flat.
It now typically takes up to 10 days to get planning approval on a granny flat that meets the set requirements.
In Queensland Ipswich council, Logan City Council, Moreton Bay Regional Council and Toowoomba council currently allow the rental of a secondary dwelling.
Victoria and South Australia currently do not allow granny flats to be rented to anyone outside of the family.
