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Want to make the most of your property? Build a granny flat for rent

Many homeowners want to build a granny flat for rent purposes to have a second source of income for their family.
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In 2018, there are over 10,000 granny flats across the country. The numbers continue to climb up as more homeowners discover what a granny flat offers. Most Aussies build a granny flat for rent, hoping the structure provides them with a steady secondary source of income. 

In our previous blog, we discussed all the things you need to know before you build a granny flat. Here, we will focus on the possibilities of making your granny flat an income-generating property, plus the laws and regulations from state to state that you should know when you build a granny flat for rent. 

Laws and regulations vary from state to state.

Just because your friend built a granny flat and put it up for rent, doesn’t mean that you are legally allowed to do the same. 

Remember, each state and territory follow their own set of rules regarding building a secondary dwelling on your property. 

If you live in NSW, WA, NT, ACT, & TAS: 

These states have the most number of granny flats, mainly because of the laws and regulations that permit homeowners to build a granny flat. About 23% of the granny flats here generate income. 

The Housing Industry Association (HIA) believes that the laws established in these states aim to lessen the burden of new homeowners due to the skyrocketing price of real estate. In NSW alone, there are over 6,000 granny flats. Homeowners rent these out to their children to support their journey to independence. Others offer it to their ageing parents because renting a granny flat is cheaper than going into a retirement complex. 

READ: Why to build a granny flat for your ageing parents. 

It is also possible to rent out a granny flat to strangers (e.g. to students if you live near a university, to young professionals if you live near the CBD)

If you live in VIC, QLD and SA:

It is not impossible for homeowners in these states to build a granny flat, but the local government impose onerous restrictions on who lives here. Only immediate family members or the dependents of the homeowner are allowed to occupy the granny flat. 

In some cases, the local government order the removal or demolition of the granny flat when the occupant moved out or passed away. 

Here in Superdraft, we help our clients seek planning advice from their local council so we can begin the work correctly and following the state’s guidelines. 

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How a granny flat can earn you money

The idea of building a granny flat happened because there’s a need for young people to accommodate their elderly parents and keep them close to the family. 

However, building a granny flat today is also an attractive way for homeowners to earn additional income. 

Let’s say that you live in a great location and you’ve spent around $95k constructing a granny flat. Once finished, put it up for rent and charge about $450 a week. (The national median rent for Australia at the end of 2019 was $435 a week.) 

The rental income, combined with your current monthly income from your day job or your business give you positive cash flow. Multiple streams of income provide you with some much-needed relief when you have an expensive mortgage to pay. 

On the other hand, your kids might have flown the coop, and there’s little need for the size of the current house. In which case, you might opt to move into the granny flat and rent your main house out for a higher return. Short term leasing sites like Stayz and Airbnb give you the option of testing the waters without diving headfirst in unknown territory.

If you are going to build a granny flat to gain additional income, make sure that it is well-designed and well-planned. The best ones have higher rental yields by up to 27%, according to the CoreLogic’s 2019 report

The same research also states that a granny flat increases the property value up to 30%. It means you will enjoy a higher resale value when you decide to sell the property. You will maximise your equity. 

Granny flats offer significant tax benefits too. You can claim depreciation as an expense, and if you need to borrow money for the build, the interest on what you borrow will be tax-deductible. You must clarify this with a tax expert as you may have to pay other costs like capital gains tax.

Make the best use of your backyard, turning assets into opportunities, where you’ll start to see the fruits of your labour come to life.

Here's one designed and built with the help of our WA designers:

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Superdraft is available to help you with all aspects of your home renovation or new home project. Schedule a call with our design consultants today.

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