How to Build Your Property Empire with Granny Flats

Building a property empire is within easy reach of anyone ready to buy their first investment property, or who already has one. In NSW and ACT, state government planning legislation is extremely friendly towards the construction of secondary dwellings – or Granny Flats – which help increase housing stock and provide much needed private rentals across the state. So lets look at how you can build a property empire with Granny Flats.

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The maths is simple

One of the main benefits of owning a Granny Flat is the rental income it can generate. Quite simply if you buy one investment property with space for a Granny Flat - when you build it you have nearly doubled your rental income on the one piece of land. Repeat this a few times and your empire is under way.

Invest in a developing area

When choosing where to buy, don’t make emotional choices about the location. Do you research and look for areas that are not as popular to buy in, with suburb median value below say $600k, but have high demand for rentals. Check demand for rentals by calling local real estate agents and confirming what the market is like throughout the year and what sort of home size is popular with reliable longer-term renters (usually how many bedrooms).

Look for big block sizes with minimal slope

Consider both the size of the block and the current arrangement of the house and any other buildings, like sheds and garages, on the block. The minimum block size for a Granny Flat to be built in NSW under a Complying Development Certificate (CDC) is 450m2. If the land has an area less than 450m2, the development cannot be carried out as complying development – that doesn’t mean you won’t be able to build your Granny Flat but may mean you have to go through a Development Application process which adds time and money to the investment.

If you can find a block that is relatively flat, that will mean your Granny Flat can be put on a slab, which means lower building costs (sometimes sloping blocks will require piers which could sometimes mean the added building costs of scaffolding).

Plus, the larger the block, the easier access will be for machinery to prepare your building site and of course the easier it will be to create nice, private spaces for your tenants.

Read more about setbacks for different block sizes.

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Get to know the local estate agents

These ideal land size and features will be in high demand and may be hard to find. Building relationships with local estate agents may ensure you get a phone call when something suitable becomes available – they will also be able to help the home be rented out quickly when its built.

Know your taxation rules

Australian taxation rules do favour property investors. In many cases your Granny Flat will be recognised as a income earning asset and therefore can be depreciated against income earned in a tax year. Always check current rules and seek advice from a professional.

Choose a quality builder to guarantee a good rental return

Granny Flats differ in quality and size, so it’s important to choose the right builder. Poorly located or constructed Granny Flats may not attract a good tenant or rental return. Be sure what you are spending will get you a good quality investment and be sure your builder helps you with upfront feasibility and is sure on the final project cost, so you know exactly how much your investment will return.

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About Kate Cubitt

Kate is Managing Director of Cubitt's. She is an experienced company director, avid investor and keen to share the financial insight she's gained being a female leader in the building industry.