Granny flats represent an amazing way to generate above average rental returns from an existing investment property.
They are relatively cheap to build, are generally well received by tenants and provide a much needed affordable housing option in many markets.
This article is all about granny flats: the need to know guide to building a granny flat.
Are granny flats a good investment?
When it comes to rental return, adding a granny flat to your existing property can be a great way to generate additional cash flow.
We recently helped a client build a granny flat on their existing piece of land. The result of their $110,000 investment was an increase in rent of $320 per week.
When it comes to capital growth a granny flat may increase the re-sale value of your property as a whole, but is generally capped to the cost of constructing the granny flat.
The laws regarding building and renting granny flats varies from state-to-state, and even from council-to-council.
There are laws surrounding the size of the block, the ability to rent the house and secondary dwelling out to un-related parties and the floor size of the granny flat itself.
In NSW granny flats are legal statewide, as a result of an innovative move by the NSW planning department.
To build a granny flat in NSW you simply need to select the right type of block and ensure the plans for building your granny flat meet the complying development regulations.
A brief run down of the complying development regulations in NSW’s Wyong City Council area on the Central Coast:
- Total land size needs to be 450m2+
- Frontage needs to be 12m+
- The granny flats floor space can be no larger than 60m2
- The granny flat may be either attached to, within or separate from the principle dwelling
- The granny flat must be at least 0.9-2.5m from the side boundary (depending on the land size)
- The granny flat must be at least 3-10m from the rear boundary (depending on the land size)
- The primary dwelling must be no more than 50% site coverage
Please note these are very quick guidelines designed to help you better understand whether or not the property you own, or the property you’re looking to buy, meets the NSW Governments complying development regulations. There are many more specific regulations that come into play when deciding to build a granny flat.
We always recommend you contact the local council or a qualified town planner to learn more about their specified guidelines and what’s legal for your property.
In QLD the laws regarding granny flats are a little less straightforward.
At this point, to build and rent out a granny flat, the legislation varies from council-to-council.
Some of these variations include whether a granny flat can be advertised and rented as a separate home to the primary dwelling, and whether it can be rented to an unrelated party.
Before you begin a project it’s also important to contact a local property manager an make sure there’s sufficient demand for a granny flat in the suburb.
At this stage most councils in QLD will allow a granny flats to be built, however they will not let the granny flat to be rented to an unrelated party.
A brief run down of the complying development regulations in QLD’s Morton Bay Council area on the north side of Brisbane:
- The secondary dwelling can be no larger than 60-85m2 – depending on the suburb.
- There is no minimum land size requirement, but the primary dwelling must not be more than 50% of the total land size.
- The secondary dwelling must be no less than 1.5m from the rear and side boundaries.
- The secondary dwelling must be set back 6m+ from front boundary.
- The secondary dwelling must be within <20m of the primary dwelling.
Another important issue to address is whether the property is in a fire or flood zone, or is likely to be affected by things like natural disasters.
Land banking can be a smart investment strategy. Knowing you can add a secondary dwelling or increase the rental return on your property through extension or renovation can help you manufacture much needed cash flow and capital growth in the future. However, you want to be confident that in the future you’re actually are allowed to build the dwelling and it meets the requirements for complying development, as well as any other requirements to do with flood or fire risk.
How to go about building a granny flat?
- Contact a town planner before your property goes unconditional and make sure you can build a granny flat or secondary dwelling on the property.
- Contact a number of builders or granny flat specialists and find out whether they can draw plans to suit the particular block.
- Consider the hazards and constraints to ensure the property you’re looking at buying, or the property you already own, meets the legal requirements.
- Arrange the builder to do a site inspection of the property. A professional should be able to come in and assess hazards, soil, sewer lines / easements, flood risk, etc.
- Once the application has been completed you should get designs drawn up for a proposed plan. You also need to get approval once those designs are done.
- Approval can take 14-20 days (in NSW under complying development) and more time in other states.
- One you have selected a builder and agreed on a fixed price contract construction shouldn’t take too long – anywhere from 8-12 weeks from excavation, slab, building and completion.
- Begin to advertise the granny flat for rent a month before construction is completed. In areas where the granny flat cannot legally be advertised to rent, contact your property manager to assess your options.
The process of building a granny flat is going to be different in every state and in every suburb.
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