Granny Flats (And Why Australians Are Turning to Them to Make Money)
Many people assume that they have to buy a separate property if they want to invest. But you can build a granny flat in your own backyard. That’s what thousands of Australians are doing right now.
All across Australia, the makeup of the average backyard is changing. Gone are the sheds that used to contain all manner of tools. In their place are a new line of stylish granny flats that allow homeowners to add a little more value to their properties.
Tim McKibbin, the chief executive of the Real Estate Institute of NSW, provides some insight. He says: “People are trying to make their available land work for them, particularly in the inner suburbs.”
There are plenty of examples of this happening, particularly in Sydney. Take the gorgeous Georgian home on Francis Street in Richmond as an example. This huge property formerly had a servant’s quarter. Today, that building houses a granny flat.
There’s also the stunning five-bedroom house in Avalon Beach that has a self-contained granny flat. That property added at least $200,000 to its market value thanks to the magic of granny flats.
So, why are so many people converting their spare space into granny flats?
The Benefits of Granny Flats
You may wonder why you’d build a granny flat instead of buying an investment property. Or, you may think that building a granny flat could have a negative effect on your existing property.
However, there are several benefits of granny flats that you may not have considered. These include the following:
- Raising Property Prices. As seen in the Avalon Beach example above, the right granny flat can have a huge impact on your property’s value. Remember that you’re creating extra living space with the flat. At best, you may convert a patch of unused land into something of value. That’s something that buyers take notice of. Moreover, the flat offers buyers the chance to earn some income from rent. That’s a strong selling point for any property.
- Secondary Income. Most people in Australia rely on their jobs to provide their income. They don’t look for secondary income sources. Perhaps this is because they don’t think they’re available unless they buy an investment property. But a granny flat offers you the chance to generate a second income without a heavy initial investment.
- Versatility: You have a lot of options with granny flats. While you can rent them out, you can also use them as dwellings for family members. In fact, the name comes from the practice of housing elderly relatives in the flats. Alternatively, you can use the flat to provide your child with their first taste of freedom without them having to buy a home. They’re versatile additions to your property.
- Depreciation Benefits: A granny flat that you rent out comes with many of the same tax benefits as an investment property. You can claim depreciation on many of the assets and the capital works involved in the flat. Savvy people can use this to lower their annual tax bills.
As you can see, granny flats can be nice little earners. But they also offer opportunities for you to take care of family members and guests. In terms of building, they typically cost much less than building a new property from scratch.
But to take advantage of these benefits of granny flats, you need to know how to build one. Here are six tips that should help.
Tip #1 – Get the Dimensions Right
Your granny flat must meet a variety of conditions to receive fast approval. Each state may differ here. But here are the conditions to meet if you want a fast approval in Sydney:
- Your lot must be at least 450sq m and 12m wide.
- It must meet the total floor space restrictions. These differ depending on the size of the lot:
- 450sq m to 600sq m – 330sqm of total floor space
- 600sq m to 900sq m – 380sqm of total floor space
- Over 900sq m – 430sqm of total floor space
- The granny flat should be at least 1.8m away from the house, unless you intend to build a fire wall between it and your property.
- You must consider the side and rear setbacks. A property of less than 900sq m needs 3m of space at the rear and 0.9m at the sides. Those over 900sq m need 5m at the rear and 1.5m at the sides.
- The flat must have a maximum height of 3.8m.
- Ideally, the lot will retain at least 25% of its landscaping after construction of the flat ends.
- The flat can have an outdoor entertainment area that connects directly to its living room. This area must be at least 24sq m in size.
- Your flat must meet various excavation requirements, depending on its distance from a boundary. These are as follows:
- 1m if located less than 1m from a boundary.
- 2m if located between 1m and 1.5m from a boundary.
- 3m if located more than 1.5m from a boundary.
- The flat must offer adequate stormwater drainage.
- Locate the flat a minimum of 3m from any significant tree trunks. These are tree trunks with a height of at least 5m.
Meeting these conditions helps you to achieve fast approval. However, it’s not impossible to build granny flats without meeting the above. It just takes a lot more time to gain the relevant permissions.
Note: ArchiStar has built an instant Granny Flat assessment tool that allows you to answer a few simple questions and determine if you are likely to receive a fast approval.
Tip #2 – Focus on the Internal Design
You have a limited amount of space to work with when building a granny flat. Failing to maximise this space makes the flat less appealing. People won’t enjoy living in it, which means that it won’t raise your property’s value as much as it should. Of course, an unappealing living space also struggles to attract tenants.
As a result, focusing on the internal design goes a long way towards building successful granny flats.
For example, the clever use of walls offers some separation between spaces in the flat. An L-shaped wall between the kitchen and living room is a good idea. This wall can also house cabinets and a fridge, which makes it practical. This separation means that the kitchen doesn’t connect directly to the living room.
Neutral colours throughout are a good idea too. They help to make the flat look less busy and can also accentuate the light that enters the space.
As for decoration, a few small knick-knacks make granny flats feel like homes. Little pictures on the walls and small items on cabinets add some flair without taking up too much space.
Remember that granny flats aren’t just buildings. They’re places where somebody will expect to live, often for several years. Treat the interior design with the same care as you’d treat your own home.
Tip #3 – Create a Budget
Granny flats are much like any other home improvement project. You need to know what you can spend before you forge on.
Create an overall budget for the project. From there, divvy up the money into categories that cover each aspect of the work. You’ll need money to pay for design, construction, and other fees. Do your research to find out how much you can dedicate to each aspect of the flat.
This budget also determines who you choose to work on the flat. Setting a limit on your intended construction costs means you can eliminate costly builders from your shortlist. Of course, that doesn’t mean you should go for the cheapest around. But your budget helps you to control your spending.
Add another layer if you intend to rent the flat to a tenant. Figure out how much income you can expect from building granny flats. Also, work out how much the property will cost in maintenance. Add all of this to your budget to generate accurate financial figures for the project.
Tip #4 – Make Space in Your Backyard
A small backyard may limit what you can do with your granny flat. But you can take several actions that allow you to maximise the space available to you.
For example, you may consider moving any water tanks that you use to collect rainwater. They may slot under your house or underneath some decking. It’s a small thing, but it adds a fair amount of space to the yard.
You may also need to get rid of the shed or garage to accommodate the flat. In the case of a shed, you may be able to incorporate it into your granny flat’s design.
Finally, consider your current planting arrangements. You may have to sacrifice some of the flowers that you’ve worked so hard on cultivating. However, there are other solutions. You may be able to move some plants into hanging baskets, for example. A sprawling garden limits your space, so consider how you can use smart gardening to keep your plants and build a granny flat.
Tip #5 – Choose the Right Builder
The quality of your builder plays a huge role in the success of your granny flat. Making the wrong choice leads to poor designs and construction. These issues can add thousands of dollars onto the investment.
Avoid any builders who aren’t punctual. You’re looking for reliability from the off, so any that turn up late to give quotes may do the same when working. From there, check which suppliers the builder uses. Again, you’re looking for a list of reliable suppliers to prevent delays.
Ask the builder to show you a valid Certificate of Currency. This demonstrates that they have building insurance, which protects you if something goes wrong.
Beyond that, pay attention to the way the builder communicates with you. Your builder should take your specific needs into account, rather than trying to sell you on a design that you don’t want. They’ll listen to and apply any tweaks that you ask for. Plus, they’ll offer transparency when talking. Be wary of any builder that avoids answering questions directly.
Tip #6 – Know Your Block
One of the biggest mistakes that those building granny flats make is to jump straight to the designing. They don’t understand their space, which means they’re going to make mistakes.
The key is to know your block of land before you start building. Figuring out which design to use comes second. First, look at important issues, such as the shape of your land and any slopes that it has. Check for sewer lines and consider any other setbacks that the block creates.
Your aim is to work with what you have, rather than design based on what you want. Failing to consider the issues with your block may make your preferred design unfeasible.
You may be able to make these checks yourself. If not, a builder that has experience with building granny flats can offer some insight.
As you can see, building granny flats isn’t as simple as finding a space and erecting a building. There are all sorts of issues for you to consider. There are the immediate problems, such as budgeting and adapting to what your land offers. You also have to consider the conditions you must meet to build the flat in the first place.
From there, you must find the right contractors. The builder is a particularly important part of this equation. A bad builder could cost you thousands of dollars, especially if they’re not insured.
Finally, there’s the property itself. Even if you don’t intend on renting it out, you still need to focus on design. An unattractive granny flat won’t add much value to your property, should you decide to sell.
Get it all right and the benefits are numerous. You increase the value of your property and can generate a secondary income. Granny flats also help you to accommodate family members, when needed.
But it all starts with finding out if you’re able to build a granny flat in the first place. That’s where Archistar can help. Our instant Granny Flat assessment helps you to determine if you’re able to build a granny flat in your yard.
All you need to do now is to get started!