What are The Benefits of Granny Flat Investing?
The classic granny flat has been reinvented as a low-cost, high-return investment in your own backyard. Whether you’re looking for regular rental income or simply need some extra space, adding a granny flat to your property could be the ideal solution.
Firstly, what is a granny flat?
If you’re unfamiliar with the term “granny flat”, don’t fret. A granny flat is a small, self-contained dwelling that's separate from the main house on your property. Some homeowners construct granny flats on top of their garages or in their backyards. Each granny flat usually has its own bedroom, bathroom, kitchen, living area, and/or laundry.
Don't be put off by the term 'granny flat', however, as they aren't limited to the elderly. Families are building granny flats within their property to serve as accommodation for visitors, teenage retreats, separate living quarters for their adult children, or even to rent out to tenants or holidaymakers as a means of income.
Why are granny flats a good investment?
Without further ado, let’s look at why granny flats are proving to be a beneficial investment for families.
1. Affordability
Typically, building a granny flat is less expensive than purchasing a standalone investment property. Based on national averages, a granny flat often costs between $80,000 to $125,000 to build. Additionally, unlike house extensions and renovations, it’s unlikely to disrupt your daily routine. Therefore, you won’t have to fork out extra money on alternative accommodation while the flat is being constructed.
2. Increased resale value
The amount of value that a granny flat will bring to your house depends on the type of granny flat you install, as well as the size of it. According to the 2019 CoreLogic/Archistart Granny Flat Report, however, a granny flat can increase the value of a home by a whopping 30%. This is because home buyers recognise the incredible potential of a granny flat, plus it instantly adds an additional bedroom, living room, or bathroom space to a property.
3. Rental income potential
The ability to generate rental income is one of the key advantages of owning a granny flat. In fact, according to the same Granny Flat Report by CoreLogic and Archistart, a granny flat can increase rental yields by 27%.
Research conducted by Gateway revealed that 23% of the country’s granny flats are already being used to generate rental income.
4. Tax benefits
Like any other investment property, you must pay tax on the rental income you generate from your granny flat. However, there may be granny flat tax exemptions available. If the cost of your granny flat exceeds your income, you may be able to deduct the loan interest as well as continuing expenditures (such as maintenance and insurance). If, on the other hand, your granny flat is positively geared (that is, the rental revenue exceeds the costs), you may only claim the ongoing expenses.
You may be able to claim value depreciation as well, but it's always best to get expert guidance before doing so.
Types of granny flats available
With so many granny flat designs available, you’re sure to find one that suits your individual space and needs. Nemfel Group, for example, offers a range of standard designed granny flats starting from studio constructions through to 3-bedroom flats. They also specialize in custom design flats to accommodate for any block size.
It’s incredible to see what leading Australian granny flat providers have on offer, with their innovative designs resembling smaller-scale houses. Buyers often have a wide range of materials to choose from too, with brick veneer and timber cladding among the most popular exteriors. With these materials available in a variety of colours, this allows buyers to match their granny flat’s design to the design of their existing property, thus allowing the additional construction to flow aesthetically from their main house.
If you’re interested in investing in a granny flat and enjoying the wide range of benefits it can offer, ZENRG Financial can help. We can assist you to secure funding at a great rate while selecting a loan that allows flexibility along the way.
If you’d like to explore your finance options, get in touch today. We’d love to help you turn your granny flat dreams into a reality in 2022.
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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.