Wakelin Property Advisory director Jarrod McCabe says homeowners run the risk of overcapitalisation when they build a granny flat. <i>Photo: Backyard Grannys</i> Wakelin Property Advisory director Jarrod McCabe says homeowners run the risk of overcapitalisation when they build a granny flat. <i>Photo: Backyard Grannys</i>
Money Property What you need to know before building a granny flat Updated:

What you need to know before building a granny flat

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More than half a million homeowners across the eastern seaboard could build a granny flat if they wanted to, a recent CoreLogic report revealed.

And there are plenty of reasons to consider it.

Your adult children could use it as a pit-stop on the road to independence, enabling them to save a deposit. Your elderly parents could use it as place to age gracefully, without infringing on your privacy. Or you could use it to earn a little extra income, by bringing in some tenants.

But before you call in the diggers, here are a few points worth considering.

Why do you want to build one?

The first step on your granny flat journey is to consider your reasons for building one.

The recent CoreLogic report found that building a granny flat could boost your property value and rental income by 30 and 27 per cent respectively.

But even so, Wakelin Property Advisory director Jarrod McCabe says choosing to build isn’t a decision you should take lightly.

As he sees it, future buyers of your home will mostly prefer a larger backyard to one with a granny flat, and so he recommends only building one if it complements your lifestyle.

“You shouldn’t be doing it if you think it will increase the value of your property, because more often than not, it will cost you more than it adds to your property’s value,” he said.

granny flat
A granny flat could suit your adult children or elderly parents. But not all states allow you to rent them out. Photo: Backyard Grannys

And property advisor Anna Porter, director of Suburbanite, offered some words of warning, too.

“They add value if they are private and don’t detract from the use and functionality of the main house. But if they take up the entire backyard and remove privacy then they can have the opposite effect,” she told The New Daily.

It’s worth noting here, too, that it’s illegal to rent out your granny flat to someone other than a ‘dependent’ or family member in South Australia, Victoria, and certain parts of Queensland.

Are you allowed to build one?

Once you’ve decided to forge ahead with building a granny flat, you need to check with your local council whether your property meets the minimum requirements.

For instance, properties in NSW must be located in residential zoning and have a minimum size of 450 square metres to accommodate a granny flat – which, when built, must maintain a 3m setback from the rear boundary, 0.9m setbacks from the side boundaries, and have an indoor space no larger than 60 square metres.

“You can have decks attached – and patios, garages and car ports. But, internally, you can’t exceed 60 square metres,” said Alex Mitchell, managing director of NSW-based Backyard Grannys.

Each council has different guidelines on minimum block sizes, as well as different approval hoops to jump through, so you should contact them before consulting a builder.

Maximum granny flat sizes range between 55 and 80 square metres in Queensland. Photo: Lifestyle Granny Flats

What features should a granny flat include?

As with most building projects, there’s no one correct way to build a granny flat. Rather, it should satisfy your budget and personal circumstances, and be sensitive to privacy.

“It’s about making the granny flat feel, as much as possible, like it’s just a small home,” Mr Mitchell said.

“When you’ve got a corner block, for example, putting a fence in between the granny flat and the house, and opening up the side fence to the road – essentially giving the granny flat its own streetscape – that can really add value to the property.”

The block size, contours of the land, and intended use of the flat should also play a major role in shaping the final design, according to Qld-based Lifestyle Granny Flats owner Allan Stroud.

“For example, if it’s for elderly people, we would put extra wide doors in, the bathroom would be set down a bit so the floor is level, and there would be good access for wheelchairs,” he said.

granny flats
Wakelin Property Advisory director Jarrod McCabe said the cost of building a granny flat often exceeded the value it added to the property. Photo: Backyard Grannys

How much does a granny flat cost?

The cost of building a granny flat ultimately depends on its specification, though most range between $100,000 and $250,000.

Mr Mitchell told The New Daily that he mostly quoted between $120,000 and $150,000 for a two-bedroom granny flat, while Mr Stroud said he typically charged between $135,000 and $185,000.

“The procedure is no different to building a home – you’ve got to go through soil tests, engineering and approvals,” Mr Stroud said.

“And the contract is just like a normal house contract, too – with in-progress payments.”

Mr Mitchell and Mr Stroud added that the whole process, from initial phone call to completion, typically took five months, with the build itself taking between 10 and 12 weeks.

There’s a danger of overcapitalisation when building a granny flat for your family. Photo: Lifestyle Granny Flats

What else should I consider?

“One of the prickly things that we recommend is identifying who owns the granny flat – this is a big one, because we’ve had an instance before where the family fell out and the daughter and son-in-law locked the parents out of the cottage,” Mr Stroud said.

“So if the kids are going into it, and the kids are paying for it, then there needs to be some sort of agreement. This is a very critical point but one that people don’t like to talk about.”