The current government legislation that now allows for a Granny Flat to be constructed on a residential property is possibly one of the greatest investment opportunities that existing property owners may see in their lifetime.
Not all Granny Flats are built to last – property commentators warn that a poorly considered and poor-quality Granny Flat may, in time, detract from the value of a family home. By contrast, a well-built Granny Flat has potential to increase the value of the site while providing a good rental investment.
For many, a rental income of more than $25,000p.a. is achievable.
- As an example, a Granny Flat costing around $130,000 to build typically generates an annual rental yield of more than 15% in Sydney or Melbourne, assuming a tenant pays the going market rate.
- That’s extremely favourable when compared to typical rental yields of less than 4% in both Sydney and Melbourne cities.
Average depreciation deductions for a Granny Flat – which includes proportions of utility bills, land rates and borrowing costs can also be claimed against income to reduce tax.
- Shared areas between the granny flat and owner-occupied property, such as patios, pools and barbecues, can also be deducted depending upon usage.
- Typical deductions are about $6,000 in the first year, rising to a total of more than $25,000 over five years.
Investors considering ways to shore up cash flow and profit from the current market conditions, without breaking the bank, will find it hard to ignore a Granny Flat as a cost-effective rental cash flow.
- Most states, including NSW, allow Granny flats to be rented.
- Having a rented Granny Flat alongside the principal residence allows you to keep an eye on tenants and often allows owners to self-manage the tenancy to further boost profitability.
- Information about eligibility and restrictions is available online from State planning and environment departments.
Contact us today to find out more or to speak to one of our friendly consultants who can discuss your project.