Building a granny flat is an excellent way to squeeze the most out of rental yields if your state allows granny flats to be rented to people other than family members. They’re also a great alternative to extending your current home. There are, however, financial considerations to take into account before jumping into granny flat construction, so what are they?
Consider the overall cost of building a granny flats
The build costs are one of the key financial considerations that have to be made when deciding if building a granny flat is a suitable exercise for you and your family. Lenders generally look at the property’s value with the cost of the build included, before they approve finance. Obtaining pre-approval is the best way to give yourself an idea of what sort of build you can afford based on your income.
Before you build, you will also need to submit an application to your council. When submitting an application for building a granny flat to council, you should be aware that:
- A Development Approval (DA) application may need to be lodged
- In Victoria, only a person dependant on the owner/occupier of the main house can live in a granny flat
- The granny flat must comply with Australian Building Standards
- A granny flat must include: a bathroom, kitchen, private entrance and outdoor space
- Only one granny flat is allowed on a single residential property
Choose a builder who works with fixed price contracts
Granny flats are not inexpensive to build, but can often cost less than extending your home. Custom built granny flats can often incur unforeseen costs as some builders may not include slab, plumbing or electricity in their quotes. However, at Lifestyle Granny Flats your peace of mind is of utmost importance. That’s why we only work with fixed price contracts. You’ll know exactly what you will be getting and how much it will cost, all without the risk of substantial budget blowouts.
Will owning a granny flat impact Centrelink assistance?
When it comes to government assistance such as Centrelink, your status as a homeowner or non-homer can have a large impact on your payments. It is important to speak to your financial advisor to discuss the impacts of your potential granny flat purchase on government assistance.
Other financial considerations surrounding granny flats relate to granny flat interest. This is where someone transfers ownership of their home or pays for the right to live in a specific home for life, which quite often occurs when older people will move into a granny flat on to their property. Financial consideration needs to be given to this topic due to the fact that if the owner of the home decides they want to sell, they will have to:
- Give money or assets to the interest owner
- Make it a condition of sale that the interest owner can live in the granny until they pass
- Transfer the granny flat interest to another property
Granny flat interest can also affect your eligibility or rate of government assistance payments.