How To Build A Granny Flat

Good day! My name is Ben Everingham and today we’re gonna talk about how to build a granny flat.

Good day! My name’s Ben Everingham and I’m the director here at Pumped On Property. We are a buyers agency and today we’re gonna to talk about how to build a granny flat. So granny flats, to me, are one of the best things ever invented in the Australian property market. It allows the average punter, Australia wide, the opportunity to go out and make some additional income from their own home, it provides affordable housing options to the Australian marketplace, and as an investor, it gives you the opportunity to turn one income on an existing house into a dual income, or a secondary income, through your granny flat. So I absolutely love granny flats, and today we’re gonna walk through end to end that entire granny flat experience.

So a little bit about my background, I come from a background pre-starting Pumped On Property where I worked for one of the biggest builders in Australia. And that builder, on the year that I left, almost did nineteen hundred homes between Australia, New Zealand and America. So I understand a little bit about building, and we also help our clients do a significant number of granny flats. We’ve got five of them currently building properties, or granny flats on the backs of their properties at the moment. So really excited to get stuck into it.

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So the first thing I wanted to talk about and something that’s overlooked often is – why actually build a granny flat? And so for me, it’s really about the positives and negatives associated with doing it. So for me some of the positives is obviously dual income, the passive income side of it, the fact that with that dual income, if you don’t have a tenant in the house, you can have one in the backyard. For me it’s also a really, really powerful opportunity. When you look at the cost and return on investment, it’s almost the best use of your money in the Australian market place, at the moment. Particularly, from a cash flow perspective. They’re relatively affordable to build, they’re relatively easy if you buy the right house, or the right piece of land, to get through council without really too many headaches, too much cost, or too much work. So I suppose the flip side of that, some of the negatives, is not everybody loves to live in them, not everybody wants a granny flat in the back of their house, and in some areas, it can actually detract from the value of the property. So let’s say, for example, we’re talking about the inner city market in Sydney or in Brisbane where granny flats potentially would be feasible within ten and fifteen km’s of the city, it may not always be the best use of your funds if, at some point in the future, you’re gonna target the re-sale of that property to the owner-occupier market who may or may not want a granny flat in the backyard. But the way I see it, for me personally, the positives definitely outweigh the negatives. I own a number of properties myself with granny flats in the backyard and absolutely love the income they generate, as well as the security they give me as an investor.

So the cost associated with a granny flat is something that I find is kind of difficult to find online. The reality is there’s all sorts of different options from your very, very cheap, imported demountables that you just whack on site, which cost anywhere between twenty and fifty grand. Then you’ve got your cheaper investor level product which cost between sort of seventy and a hundred thousand dollars. And then you can move into that more premium granny flat market, which is your hundred and ten to a hundred and fifty thousand dollars plus with all the bells and whistles. That’s the type of granny flat that I personally like to buy and build. That hundred and ten thousand dollar mark where you’re really meeting the market with a high quality product thats gonna stand the test of time, that gets that above average rent return and that better return on investment over a five, ten, fifteen, twenty year period, which is really what it’s all about.

So the first part of the granny flat process is really around site selection. And this is the place where you make or break your granny flat. So for every single property that I’m buying brand new now, I basically put a due diligence clause in there for fourteen days and in that fourteen days I find out, before I have to settle or before I have go un-conditional or exchange, that I can put a granny flat on that site because for me, my strategy is to buy a house or build a house and put a granny flat in the backyard in the future. I want to know before I own that property that I can. For those of you who already have an existing property, and you wanna know if you can get a granny flat on the site, just give the council or a local town planner a quick call. Tell them what you’re planning on doing, and just get them to have a quick look at the site and see if its actually self assessable.

So self assessable is the absolute key. Self assessable means that the builder or the builder certified can actually get it ticked off and approved for you without having to go through development approval, without having to go through the council and pay exuberant amounts of money just to get the thing approved, and it means that you’re gonna come into less hassles and its gonna take less time to complete your project and start your project. So there’s a heap of different things and every single marketplace in Australia has different rules around these granny flats, or in some areas they’re called secondary dwellings, auxiliary units, ancillary units. Like New South Wales, you just have a state wide approach to granny flats and the way that sites can be assessable or not assessable. But the reality is really about getting into the nuts and bolts of what you can do on that site. And the best way to do that is to talk to the council or talk to a town planner, but there are certain things in each area that are important. One of those is site coverage. So again, a rule, for example, across the board in most areas of Australia might be no more than fifty percent of the site, including the house and the granny flat, can be covered by the buildings. It might be setbacks from side fences, from back fences, it might be the position on the block, so generally they like to see them behind the house. It might actually be the size of the dwelling, so even here in South East Queensland, you know the Gold Coast council and the Brisbane councils won’t let you legally rent them to unrelated members of a family unit, but in the Sunshine Coast for example, Moreton Bay, which is North Brisbane, Ipswich and Logan, you can. I know on the Sunshine Coast it’s sixty square meters, in North Brisbane it’s fifty five square meters. There’s just so many different requirements, I suppose, in each area.

A general rule of thumb is if you can do fifty plus square meters, you should be able to squeeze two bedrooms into the granny flat. If it’s less than fifty square meters, you really start jeopardising design and space, so if you can only do something less that fifty square meters, you might look at a one bedroom option and just beef it up with a bit of a deck and some outdoor living space, as well. So other things to be conscious of is the type of soil, the position of the sewers on the block, things like bush fires, floods, all of those sorts of standard building things that come into play, and that could be overlaid by the council to cause you dramas, things like noise, etc, that may end up costing you more money during the construction. So if you’ve already got a site, I suppose you’ve gotta just work with the constraints of what you’ve got, but if you’re finding a new site, why not find one that’s super easy to work with, and to get through council, and to build on cheaply without having to fork hundreds or thousands of dollars out of your own pocket, or even tens of thousands of dollars sometimes.

The next things is assessing the site. So for me personally, I always just go to the local town planner that specialises in this type of product and I say ‘can you please do a planning check on this property?’, and that planning check will come back and tell me wether the site is self assessable or code assessable. Self assessable means the certifier or the builder can help you get it approved without going through council, and code assessable or acquiring development approval means you actually have to go through the process which means planning fees, council fees, etc. And you’re kind of behind the eight ball before you even begin to get started.

So after you’ve done that town planning check, I always ask the council for a sewage or a drainage plan so that I can see where on the house, on the back of the land, or the back of the block, those things are actually located. Again, if you’ve got to build over the top or relocate a sewer or a drain, or there’s some sort of covenant over the back of the property, or running through the middle of the property, it could add, again, thousands if not tens of thousands of dollars of cost to the property. So it’s really important to uncover that first, dole before you dig is also another great way you can gain access to some of that information free and very quickly, as well. And then I also like to send the builder or a number of builders around to the site, and they actually do a site check, and at that stage, they’re looking at the electrical box and whether it needs an upgrade, they’re looking at the sewage, the drainage position, they’re looking at the position on the block and beginning to get an idea in their head of how it could come together and how it could make it work. Because at the end of the day, the builder’s the ones that does tens, if not hundreds, of these per year, and they’re the one that you’ve really gotta lean on and trust that they’ve got your best interest at heart, and they’re gonna help you get the best outcome on that particular site.

So the cool thing about granny flats is they’re small, you can put them on piers if it’s a bit of a steeper site, if it’s a flat site, you might put them on piers or you might put a slab down. there’s heaps of creative options. You could make them squares, you could make them L shaped, you could make them longer and skinny. They really are adaptable, and there’s so many great floor plans to work with. And I’m sure for anyone who’s interested, you’ve probably already started to jump online and take a bit of a look at those things, the designs. I found a really cool site that can add some value, it’s grannyflatfinder.com.au. You can just type in your area, and you can get up to three quotes from builders. Sometimes those builders are good, and sometimes they’re not, but at least it gives you a really cool starting point to get started in your local market.

The next thing is about finding the appropriate position on your site. And this should not be over or underestimated because positioning is super, super important when it comes to the best use of the space in the yard. And also creating an environment where the people living in the house and the people living in the granny flat aren’t imposing each other, and you’ve got clear lines of separation where they’re not bumping into each other awkwardly, or their eyes aren’t catching overlooking the fence and things like that. So you’re really trying to create a space that brings everything together and is the best use of the site. And your builder will help you do that and sometimes it’s good to get the builder to take you around some of the sites under construction or some completed sites and just get a bit of a feel for how you could do different things.

The next part of the process is actually getting to the nitty gritty of selecting a builder. For me, coming from a building background, I don’t have a huge amount of trust of the majority of builders in Australia. For those of you who have built property before, you’ll see where I’m coming from. But you really want to focus on a few things.

The first is quality. So I hear a lot of people, especially in the Sydney market when they changed the granny flats laws, that went out and just built these absolutely rubbish products on properties and now they’re paying for it, because they’re getting a hundred, a hundred fifty dollars or less rent per week because they didn’t buy and build the right product for that market. So sometimes I think spending a little bit more and targeting that owner-occupier market place, as opposed to the investor market, is a really good, long-term use of those funds if you’re gonna hold it.

The next one is price. So as I said before, you can pay really cheap and you can pay really expensive, but at the end of the day, whichever type of product you choose, and whichever strategy you feel comfortable taking forward, the reality is that builder needs to give you a hundred percent fixed price before you move forward with signing off and paying deposit. Because what I’ve heard and what I’ve seen from clients in the past working with different builders, when they do it on their own, is that the builder might charge you an entry price of ninety thousand dollars, and then by the time it’s all said and done, you’ve been smashed with another thirty thousand or forty thousand dollars worth of costs that are these additional upgrades that weren’t included in the quote, and because your solicitor didn’t look at the quote properly, or because you didn’t interpret the quote and actually look at what was included and what was missing, often you’re left hanging. And unfortunately, the great thing about money that you borrow from the bank is that if you’re only putting in ten or twenty percent deposit down, you’ve only gotta come up with ten or twenty percent out of your pocket, but if the builder asked you for thirty grand and it’s not in the building contact, that’s thirty hard thousand dollars of cash out of your pocket. So make sure the quote is fixed, spend that extra time sitting with the builder and confirming that everything you want is included and make sure that you’re getting the right product for your market place.

Another question I always ask the builder is around volume. How many of these granny flats have they actually building in that local area annually, and you’ll find that there’s plenty of people that talk the talk, but there’s not many that walk the walk. And you really want to find a builder that’s been doing it for a long period of time, and that’s been doing it well and can that take you around and show you examples of similar sites and similar properties where they’ve achieved a great outcome for their clients. And anybody that’s worked with a company that they can trust knows that that company will be more than happy to share information and sites with you, and the companies that aren’t prepared to share that information with you are often the shaky and the dodgy ones. So just be careful there, make sure you do your due diligence and your research.

Another thing is how long it takes to actually build the granny flat. So basically, it generally takes between eight and twelve weeks to build the granny flat. But on top of that, you’ve got a couple of weeks of certification, a couple of weeks of scheduling before you get to site, maybe a month to go through all of the information we discussed before. So the process can actually take up to six months, which is a lot longer than most people plan for. So it’s important to ask the builder, you know, can they help you get it certified? Can they manage the entire process on your behalf, and give you that security and peace of mind that you’re sort of at a one stop shop that can do the entire job for you.

And then it’s also important, if it’s your first time around, to have a builder that’s prepared to take that extra time with you and really hold your hand through the process, and make you feel comfortable, and keep you educated across the process as you go. So there’s some of the things I look for when selecting a builder and generally, unless it’s someone I’ve worked with in the past, I always get those three quotes so that I can compare apples with apples, as well.

After you’ve selected your builder, and you’ve signed off on your contact and you’ve got your finance sorted, the next step is certification, which the builders team should do for you. If the builder is not prepared to do it for you, and you want to do it yourself, you might work with the town planner to get it done. But certification is extremely important part of the process, and again, certification can take anywhere between two and eight, ten weeks, depending on the quality of your team, the quality of your builder and the local area that you’re actually focusing on for your granny flat. Then there’s the build side of things. Generally, if it’s an out of area build, I would like the builder to provide me a fortnightly email update, and also some photos of the site so I can see what’s going on. But the reality is sometimes the builders don’t want to do that, or that’s not their standard process and you’ve got to put a bit trust in them that they are gonna do the right thing by you.

I use this really, really cool little company called handovers.com. If I’m building a granny flat myself, or for a client, in an area that I can’t physically go and have a look at it myself, after the granny flat’s all said and done, they will come and do a pre-inspection and identify any maintenance issues for you, or double check that the builders done everything they said they would, and then they’ll give that builder a small window of opportunity to fix any issues and then they’ll go and do a secondary inspection and that gives you that peace of mind. The people at handovers.com are professional certifiers and builders. They know what they’re looking for and they’ve got a very rigorous process. So they can be a really cool tool just to give yourself the peace of mind that everything is happening the right way. Generally, most builders would give you a thirteen week maintenance period where if there are any issues that you, your tenant, your property manager, or handovers.com identify, they’re legally bound to fix those things for you, so hold them accountable for it. Get them back out there to fix any issues or thing that you’re not happy with.

The last thing I wanted to talk about is tenants. The final part of the process after you’ve done the handover inspection, and it’s all clean and it’s beautiful, is to begin advertising for a tenant. Often, I continue, because I don’t want to lose the income from the property that I currently own, or the house, I’ll keep the tenant in that property while I’m building the granny flat, and I’ll give them just a small reduction because no one likes builders running around their backyard for eight to twelve weeks and disrupting their life, and making everything dirty. If it’s a good tenant that I want to hold long term, I’ll give them a bit of a reduction. In terms of targeting tenants, you’d be surprised how many people actually rent these granny flats from you that you wouldn’t think they would. I’ve got these tenants, for example, I’ve had three tenants in three years on a granny flat I’ve got in a Brisbane area, and I’ve had single guys that are earning eighty hundred thousand dollars per year living in there, I’ve had single mum with their kids, I’ve had an older person living in there that had just gone through a bit of a divorce and a bit of a bust up with their relationship, unfortunately, and it was a solution for them. And then you’ve got a whole other segment of the market which is people looking to rent the house, and then rent the granny flat so their kids can have it to use it as a teenager’s retreat. you’ve got people that are looking to save for a first investment property, or for a house, so they just want some affordable options for a period of time. You’ve got young couples that are looking to move out of home for the first time and just want a simple, cheap little space to move in.

So the market for these granny flats is huge, it’s always super, super important to make sure that you’re doing these things in a place where the average rental vacancy rate is below two percent, so there’s a undersupply of available property for rent. You definitely don’t want to be doing these things in an area where there’s a massive oversupply of property on the market.

But that’s a wrap for me today, I hope you’ve appreciated the video. And obviously just to give you a quick summary, we discussed why buy a granny flat and the pros and cons of that, the cost associated with building a granny flat, how important it is to get the site selection up front, and to assess the site correctly and properly. To find the appropriate position on the site, to select that builder, make sure certification goes through okay, build the property correctly, legally, efficiently, effectively. Get the handovers.com guys to come out there and help you out, and then obviously get the right tenant in place.

So I really appreciate the opportunity to share this video with you. Granny flats are something that I personally love to add to my property portfolio and we help ten, twenty, thirty, forty people build granny flats on their existing investment property. So if you need some support with granny flats, just jump over to www.pumpedonproperty.com and touch base with us and I’d be more than happy to introduce you to somebody, or I’d be happy to talk about your project and how we can potentially introduce you to someone that can get you the right quality, the right design, the right position, the right price point and save you some money, as well.

Thank you so much for your time today, until next time, stay hungry! Thank you!

Ben Everingham

About

Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.