What is a Granny Flat?

For home owners with the space, building a granny flat in the backyard can be a shrewd investment – delivering rental income and boosting a property’s value.

A granny flat is a self-contained housing unit located on the same block as a single-family dwelling, often used for an ageing parent.

Building a granny flat is increasingly popular across Australia, but it’s not straightforward, due to differing rules.

They can be custom-built, pre-fabricated, transportable, or even flat-pack.

Can anyone build a granny flat on their block?

Lee Janssen, managing director of Avalon Granny Flats, says the rules and regulations around granny flats vary from state to state and even from council to council, so research is key for those thinking of building one.

“The first question most people want answered is ‘am I actually allowed to build a granny flat on my block? The short answer, in most cases, is normally yes, but as each council has different guidelines to stick to, it can be tricky to figure out what you can and can’t do with your own block,” Janssen says.

In New South Wales, where Janssen’s firm builds the majority of its properties, statewide planning legislation allows granny flats to be built and rented out in the same way as any other residence.

Check out: Our Guide to Building a Granny Flat

You will need a permit to build a granny flat on your block. Picture: Getty

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All that is usually required is to submit a Development Application (DA) to the local council – and most builders handle this on behalf of their clients.

“Even though there is consistent legislation, some councils charge a ‘contribution fee’, up to $20,000, which may make the exercise prohibitive. This is only some councils though,” Janssen says.

In Queensland, the minimum lot size, maximum flat size, required setbacks and rules about who can live in a granny flat differs from one council to the next.

Meanwhile, in Victoria, a granny flat can only be rented to a “person dependant on a resident of the main dwelling”, Janssen says.

Do granny flats need to comply with building codes?

Make sure you research the regulations around building a granny flat, as they can vary. Picture: realestate.com.au/buy

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All granny flats must comply with both the Building Code of Australia and any relevant Australian Standards.

With a two-bedroom granny flat in some parts of Sydney yielding up to $720 per week in rental income, Janssen says the appeal of adding one is self-evident. According to him, a custom-built, two-bed flat with a kitchenette and bathroom costs about $130,000 to build, all up – although the exact amount depends on finishes.

“Modular and transportable products may be advertised cheaper, but if you’re sitting on a property worth $1 million or more, for example, adding a quality custom-built granny flat is the way to go.

“We have definitely seen a significant increase in demand in Sydney in particular, in recent years, because of the housing affordability crisis and the return on investment,” Janssen says.

Read more: What Does it Cost to Build a Granny Flat?

How can home owners rent out a granny flat?

As well as using them for family members or renting them out, granny flats are often used as Air BnB properties, according to Janssen.

Like any well-executed home upgrade, adding a granny flat can also boost re-sale value, thanks to reliable rental income, which appeals to both owners and investors.

What connections do you need to build a granny flat?

Work out where the connections are for things like electricity and water. Picture:realestate.com.au/buy

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After crunching the numbers and setting a budget, home owners should find out where their services are, Janssen says.

“Things like sewers, stormwater drains, easements etc all need to be considered when building a granny flat. The last thing you want to do is pre-design something that is going to conflict with the existing property’s underground layout. This can be the biggest complication with the process, so it’s an important stage,” he says.

Granny flat designs and costing

Finding a design and shopping around is next. Janssen recommends looking online for plans, or doing a rough sketch. A custom granny flat supplier can provide ballpark costs based on rough sketches, he says.

“A granny flat is a big ticket item in terms of shopping and you want to build with someone who knows their stuff – some who will give you the best value for your money and provide you with the right service,” he says.

Dealing with the local council is another benefit of working with a builder, as most will liaise with council on behalf of the home owner. Janssen says six to eight months is normally required for the approval process, but the build only takes about eight weeks.