If you’ve been looking into granny flats, you might be surprised at how many businesses now offer to sell, build, or even finance one. Granny flats are a practical and affordable solution as house prices go up, rental vacancies go down, and living costs go up.
Granny flats used to be just for housing older parents or making room for a growing family. Now, more and more people see them as rental units for adult children or tenants. They give you a steady stream of income and help you pay off your mortgage without having to buy a whole property.
Why Should You Buy a Granny Flat Right Now?
Dean Roller built a granny flat near the NSW Central Coast for about $110,000. He rents it out for $500 to $600 a week, which helps his family deal with their mortgage stress. His experience made universities, retired parents, and families who were downsizing want more. Soon after, he started DIY Granny Flat, where he gave advice and built homes for people with similar housing problems.
Planning and rules are becoming easier.
Changes to the government in all of Australia’s states have made it easier to build and rent granny flats. While New South Wales was the first state to ease its laws in 2009, other states, like Victoria, Queensland, South Australia, and WA, made changes between 2022 and 2024. Renters don’t have to be family members anymore, as they used to have to be. Still, rules are different in each state and council. They are in charge of:
- The size and placement of outbuildings (setbacks from property lines)
- Total floor area (usually less than 60–70 sqm)
- Rules for renting and being a tenant
Before you do anything, make sure you know what your local council says. In one area, something might be okay, but not in another.
Keeping your privacy and the rules for living together
Some people don’t like having tenants so close by. Dean’s design put the granny flat 15 meters away from his house, with a fenced path to keep them apart. He says they don’t talk to each other very often.
But renters may feel differently. Stephanie from Queensland said that using shared appliances, like a washing machine, made her feel uncomfortable. It’s important to have boundaries and respect each other. Talk about things openly and set rules for the house early on.
Different kinds of granny flats and their usual prices
There are three main ways to build a granny flat:
- Build on-site
Made on-site with full builders. Time to build: 4 to 6 months. Prices: $180,000 or more for a 60-square-meter two-bedroom unit; $120,000 to $140,000 if you manage trades as an owner-builder (to avoid builder profit). - Modular or Prefabricated:
- Built somewhere else and then brought to the site and put together.
- Faster turnaround, maybe in a few days.
Less expensive than building your own, but check with your local government first because some councils won’t allow them because they aren’t safe to live in or rent out.
- Changing the garage
- Changes an existing garage into a place to live.
- It can be cheap, but you might have to make changes to meet building codes, boundary lines, and ceiling height.
How to Pay for a Granny Flat
Drew Healey from CommBank gives these tips:
You can borrow up to 100% of the cost of building with the equity in your home. If you meet the requirements for a loan and follow the rules, you can get approval quickly. You can get into the investment property market without buying extra land by getting a granny flat.
But don’t ever think that the value of the granny flat is the same as the cost of building it. A $200,000 build won’t automatically raise the value of your home by the same amount. Prices can also change based on your postcode or builder, so shop around.
Extra Value: What Else You Should Know
Rental Income and Following the Rules Granny flats can get good rental returns. But make sure to check your area’s zoning rules, because not all council zones let you let a second home.
Tax and Insurance
You will need insurance for your landlord. You need to report your rental income, and it could change how much you owe in taxes or how much you owe on your home loan.
Design that lasts and uses less energy
Think about adding solar panels, good insulation, LED lights, and water-saving fixtures. These lower your utility bills and make your unit more appealing to renters who care about the environment.
Council Notices and Feedback from Neighbours
Some councils require that neighbors be told before building. Talking to people early on can stop problems or delays.
Can a granny flat make your property worth more?
More and more people are seeing granny flats as smart long-term investments. They might not immediately raise the value of your home by the full cost of construction, but they can make it much more appealing overall, especially in competitive housing markets.
Families, investors, and multigenerational households looking for extra space or rental income are drawn to properties with a well-designed and fully approved secondary dwelling. But it’s important to work closely with local council planning and real estate experts to make sure your build really adds value.
If the granny flat is legal to rent and looks good with the main house, it can be very appealing. People in places like Sydney, Melbourne, and Brisbane where land is scarce are willing to pay more for homes that can be used for both living and making money.
Should you make a granny flat for your adult kids?
Housing costs are still a problem for young Australians, so more families are using granny flats to help their adult children. A granny flat gives your kids their own space to live, whether they’re saving for their first home, coming back from school, or trying to figure out what to do with their lives.
This setup can work well if everyone respects the rules and talks about their expectations early on. It also gives parents peace of mind to know that their kids are safe and sound. The flat can be used for guests, rented out, or even as a place for elderly people to live over time, making it a flexible, multigenerational asset.
Read more about buying property with lease agreement in Australia.
conclusion
Granny flats are more than just places to live. A granny flat can be more than just an addition to your home. It can turn your backyard into a source of passive income that lasts for years and helps you save money on living costs. Now is a great time to plan because of better rules, new ways of designing things, and financing that can change.
Of course, planning is important for success. This includes following the law, building smartly, screening tenants, and making financial models. But if you do your homework and use the right approach, a granny flat can be one of the best things you can do to improve your property.
1. What is a granny flat?
A granny flat is a separate living space on the same piece of land as the main house. It usually has a kitchen, bathroom, living room, and bedroom, and people often use it to live in or rent out.
2. Is it okay to rent out a granny flat to anyone?
Yes, in most Australian states, new laws now let you rent your granny flat to people who are not family members. You still have to follow your local council’s rules about building and zoning, though.
3. What is the price of building a granny flat in Australia?
Prices depend on the design, size, location, and how the building is built. On-site builds can cost as little as $120,000, but prefabricated or modular options may be a little less expensive. Custom builds that are high-end can cost more than $200,000.
4. Do I need permission from the council to build a granny flat?
Yes. Every local government has its own rules and process for approving things like block size, setbacks, and how a dwelling can be used. Before you start your project, always check with your local council.
5. Is it a good idea to build a granny flat?
Definitely. A granny flat can help you make money by renting it out, give your extended family a place to stay, or make your property more appealing to future buyers. It can be a low-maintenance, high-yield investment strategy if you do it right.
