Do Granny Flats Make a Good Investment?

Things are getting thick in the real estate sector. It’s hard to find fulfilling investment opportunities that can supplement your income. However, there is a way out – Granny’s flat.

They are getting popular in Australia, with about 5000 of them being built each year. This tremendous increase in granny flats can be linked to the changes in the state-level regulations for secondary residences that intend to make more affordable houses within the metro areas.

With this information in mind, you might wonder, are granny flats worth the risk? Will they make a good investment?

The answer to this question is “it depends .”Let’s take a deeper look at granny flats, so you know whether or not to invest in them!

Granny Flats – Should You Consider Investing in Them?

Sometimes, it’s worth taking a risk – you might not know what you will realise after doing it. Now, this is the case with granny flats. They can be a worthwhile investment in some cases. Here are reasons you should consider getting a granny flat builder to construct one for you within your premises.

1. You Earn Extra Rental Income

If you have a big space in your backyard, putting up a granny can be an ideal way to earn additional income without much hassle. You do not have to incur many expenses when starting the construction.

You are exempted from paying considerable upfront amounts like the lender’s mortgage insurance and stamp duty.

2. Your Property’s Value Increases

Building a granny flat makes your property appreciate. You can have water and electricity metres separate for this construction so that you do not have to pay for the expense.

3. Spreads Your Income Risk

You already know that having more than one income source is crucial. One investment property might not be enough since, at some time, it will be empty, meaning no income for you.

Consider building 2 bedroom granny flats within your compound to diversify the risk. This way, you have an income source when your other rental is vacant.

You may decide to put the granny flat as an Airbnb for people looking for holiday homes. Alternatively, you can rent it out permanently.

4. You have Extra Claimable

With a granny flat, you can get an excellent income tax break which comes in depreciation form. You will be required to get a depreciation report that will enable you to claim a certain amount each year.

Getting these reports helps determine how much your property has depreciated. The depreciated amount is deducted from the granny flat’s rental income, so you only pay a certain tax amount instead of the full.

5. It’s a Flexible Investment Opportunity

Another great thing about granny flats is that they offer a flexible investment option. You may decide to rent out the main property and the granny flat so you earn double income.

Similarly, you can opt to move to the granny flat and rent out the bigger house to earn more rental income. Also, you may use it to accommodate your visitors when not in use as a vacation rental.

6. You live in the Suburbs

Before thinking of having a granny flat, first consider your location. You will make greater profits if you live in an appealing area and build it. Mostly they will do best in a higher socioeconomic area.

Your home builders Sydney can help you know if your area is feasible for building a granny flat but still, you can check these things:

• Can people easily access amenities such as shopping centres and schools?
• The area’s popularity for tourists, events and weekend holidays
• The number of people in the area

When Are Granny Flats a Bad Investment?

Even though you realise the most benefits with a granny flat, it could not be an investment worth considering for the following reasons.

1. The Costs Might Exceed Your Expectation

Do not underestimate the amount you will spend on building a granny. You might over-capitalise if you choose to go for equity when building it, which will come to haunt you later.

Also, running out of construction money is easy if you don’t stick to your budget. With proper planning, the value of your property will be higher than the cost.

2. Building it in the Wrong Area

This blooming investment opportunity has brought oversupplies in some areas, resulting in lower rental returns. Property value could also be significantly reduced if there are many granny flats in a certain area. Therefore, research to ensure where you intend to build has a limited current and future supply of granny flats.

3. Only a Few Councils Allow Granny Flats

While most councils easily approve the construction of granny flats, it’s important to ensure that all regulations are in-check. This includes your block’s size, closeness to the fence and the needed access.

4. It Reduces Your Resale Market

Granny flats might not have as much demand, especially when people prefer to have an empty backyard. Potentially only investors will be interested in such.

5. No Privacy

Building a granny flat makes it impossible to subdivide your property since it’s registered as a secondary dwelling within your primary property. Your main home and granny flat have to be in the same lot.

So, Is it a Good Investment?

Why not? Despite the few downsides, if you have the option to build a granny flat, go ahead. Make them attractive and list them for Airbnb services, so you use them for personal purposes when vacant.

Granny flat builders Campbelltown and generally in Sydney towns will determine whether you can put it up and ultimately build one. Contact us for more information.