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Do granny flats add value?

Yes, a granny flat can add value to a property by adding more living space, amenities and even an extra source of income if the owner wishes to rent it out to tenants. However, as with any development, whether or not a granny flat adds value to a property depends on its size, design, construction quality and location.

backyardgrannys.com.au - Does A Granny Flat Add Value To A Property?
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Not sure how to make the most of that extra space in your backyard? Building a granny flat behind the main residence can bring all sorts of benefits, from a private office or teenager’s den to a fully-equipped guest house or cost-effective alternative to nursing home accommodation for elderly relatives. But does a granny flat add value to a property?

Yes, it sure can. In fact, building a granny flat in the backyard can add value to your property through two potential avenues: The greater price you can sell your property for once it includes a secondary dwelling. The extra income you can earn by renting out the granny flat. Of course, neither are a given so it’s important to understand the various considerations before you commit to construction. Below, we breakdown the different ways that a granny flat can add value to your home or investment property – and just how much more you could earn if you approach it right!

Does a granny flat add value to a property?

Yes, a granny flat can add value to a property by adding more living space, amenities and even an extra source of income if the owner wishes to rent it out to tenants. However, as with any development, whether or not a granny flat adds value to a property depends on its size, design, construction quality and location. It’s worth flagging that it is against the law to subdivide your property and sell the granny flat independently of the primary dwelling. Therefore, the best way to approach your backyard build is to look at it from the perspective of prospective buyers of the overall property:

Does it complement the existing dwellings’ facade?

Is it far enough away from the main residence so as to preserve privacy and green space?

How many more bedrooms will it add to the property?

Would it accommodate elderly occupants comfortably?

Could it work as a home office?

Is it in an area with high rental demand?

Will its design and features appeal to tenants?

Considering these things now will help your granny flat to add value to your property when it comes time to sell.

How much value does a granny flat add to a property?

According to the 2019 CoreLogic and Archistar report, adding a granny flat to your property can boost its value by up to 30%, as well as yield up to 27% more in rental income. Of course, this amount will vary depending on the nature of your property and the type of granny flat you add to it. In another analysis, Raine & Horne reported that properties with a granny flat often sell for a notable premium. For example, a five-bedroom house with a granny flat in Sans Souci sold for $2.2 million compared to the local median of $1.08 million. Likewise, in Cromer where the median house price is $995,000, a four-bedroom house with a granny flat sold for $1.25 million. What’s more, if you’re planning on renting out a granny flat, you may be able to earn back the cost of construction before you even consider selling your property. In fact, granny flats in sought-after suburbs can earn their owners between $200 and $600 per week in rent!

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This can be a serious drawcard for prospective buyers down the line – not only do granny flats offer an extra income stream, but owners may also avail of positive gearing and additional claimables on their depreciation schedules.

Learn more with our ultimate granny flat investment guide.

How to maximise property value with a granny flat

Whether it’s a game-changing addition to your family home or a purely financial venture to boost cash flow, there are certain best practices you can follow to really get the most value out of your granny flat. Check them out below:

1. Get expert advice from local professionals

First things first, consult with industry specialists before you build to make sure there’s demand for granny flats in your local area, from both tenants and buyers. Chances are the answer will be yes but it’s still important to confirm so that you know you’re making the right move. For example, get in touch with a trusted real estate agent in your neighbourhood to get further insight into rental market trends. Ask questions such as:

Which demographics are renting in your area?

What kinds of features and floor plans are these tenants looking for?

How much is the average rental price per week?

It’s also a good idea to speak with a registered valuer in your area so that you can better understand how a granny flat might add value to your specific property (and how best to design and construct it to maximise this figure!). Last but not least, make sure to obtain local council approval to build and rent out your granny flat!

2. Stand out to potential tenants with extra touches

Granny flats and apartments tend to come in similar sizes, so it’s no surprise that they often compete for tenants. If your plan is to lease out your granny flat, then make sure it’s set up to stand out from the surrounding rental accommodation, including block units, studios and condos. The good news? With the wide range of features, fittings and finishes to choose from, as well as the possibility of a wraparound garden and more space, it’s easy to make your granny flat more attractive than that high-rise apartment down the road. And while your budget should factor in some tenant-friendly touches (think convenient storage, outdoor living space and private laneway access, to name a few), you’ll be able to reap a greater return on investment in the long run if you’re charging for premium accommodation.

3. Appeal to buyers with quality design and construction

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While property buyers will also be checking out your granny flat’s features, they’ll be particularly interested in the quality of its overall design and construction, too. In other words, it (literally) pays to think ahead and invest in a gold-standard structure and fitout that will last decades to come after its new owners take over. Importantly, this granny flat should also compliment the look and feel of the existing property and its primary residence, ensuring a seamless style between the two separate dwellings that enhances curb appeal. You’ll also want to make sure the granny flat doesn’t encroach on the main house’s garden or take over too much green space, a mistake that can actually harm your property’s overall value. On a similar note, avoid turning your garage into a granny flat, as the lack of off-road parking might be a turn off for prospective buyers. Keeping a clear distinction between the two homes is key, as this helps potential buyers to envision how each building functions independently and privately. And as mentioned above, once you win over a buyer, you could make up to 30% more from the sale!

Build a quality granny flat on your property

So, does a granny flat add value to a property? Provided you choose a premium design, partner with the right builder and make the most of its earning potential, you could end up pocketing more from your property than ever expected! Just remember to stay on top of market trends and keep an eye out for opportunities to appeal to tenants or buyers. And with half a million properties along Australia’s eastern seaboard offering enough space to build a granny flat in the backyard, it’s time to get in on the action! If you’re ready to take the next step, Backyard Grannys is here to help. Our expert team designs and builds granny flats across Newcastle, Lake Macquarie, Maitland, Hunter Valley, the Central Coast and Sydney. For a free site inspection, contact us and we’ll be in touch as soon as possible!

backyardgrannys.com.au - Does A Granny Flat Add Value To A Property?
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