The demand for housing in Australia has averaged to about 164,000 dwellings per year. While there is a forecast for this upswing to stabilise in the next twelve months, the outlook is certainly good for house owners with some extra space to build on.

One attractive option that looks promising is the concept of granny flats, an additional smaller living unit on the same property.

Granny_flatsThis trend, of late, has caught on and is worth considering for end use that is both domestic and financial. Whether it is to accommodate your growing family, an extended one, a separate pad for the elderly or newly weds, a dedicated space for a hobby being pursued, nothing like being able to add some more space at an affordable cost. Also, for those with a commercial intent, granny flats can also double up as a home office or even a welcome source for rentals.

According to property and tax specialists, rental yields of up to 15% can be achieved through the backyard ‘gold-mine’ granny flats. Below is a snapshot of average weekly rent for granny flats in major Australian cities.



In addition to high rental yield, granny flats can be built quickly, most going up in around 12 weeks.

Now, how do you go about unlocking this hidden power in your own property? Applying to get a loan for a granny flat is becoming increasingly simpler and the options more widely available. The conditions for usage of the property and the process of raising a loan vary from state to state. For instance, it is permissible to rent out such units in ACT, Western Australia, Tasmania and Northern Territory while those in Victoria, South Australia and Queensland cannot use these as generate income. Similarly, the maximum area that a granny flat can take up too differs from region to region. Where only 60 square metres is permissible in Perth, this goes up to 80 square metres in Brisbane.

So, it is best to refer to your local council to crosscheck on the latest regulations in your state. In some areas, there is not even the need to go for an approval from the local council – a private certifier could okay it too. But let us look at some basic points to consider while going about this process.

Refer to the regional regulations by consulting the local council.

1. The property must be located only in a residential zone.

2. Both the main property and the secondary dwelling – the granny flat – should be in the same owner’s name.

3. The title should be clear and

4. There can be only one granny flat on one property.

5. The granny flat has a maximum area that is permissible.

6. There must be a separate access to the granny flat that is unobstructed.

7. All construction, including specifications relating to floor space ratio, height of the structure, the boundaries and other provisions should be in compliance with the Building Code of Australia.

As for the finance needed to fund the unit, there are some considerations to be kept in mind.

1. The property should be valued to ascertain the maximum amount

2. If there is already an equity on the property, that could be used, if possible. This is simpler and would just entail a revaluation of the property and an incremental addition to the existing mortgage. Of course, to avoid paying LMI (lenders mortgage insurance), remember to keep the percentage of borrowing under 80% of the property valuation.

3. It is also possible to go for refinancing from a different lender altogether though it can attract related charges.

4. The other option available is to go for a fresh valuation and a construction loan based on the bank valuation. HashChing verified mortgage brokers can help you find the right loan at no cost to you.

5. All documentation like the builder contract duly signed and approved plans by the council, besides the title documents in the name of the owner should be in place.

With careful weighing of the options available and being compliant to regulations, it is possible to benefit from the extra land on your property and the possibilities of the granny flat concept.



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