The Great Backyard Build: A $200K Investment that Can Generate Weekly Income

Homeowners across Australia are increasingly building granny fats and dual occupancies in their backyards as a way to boost household income or provide housing for loved ones. While many would prefer to keep their backyards as they are, the housing crisis and rising cost of living are pushing some to make better use of their unused land.

Granny fat builders have reported a surge of interest, and online searches for properties with secondary homes have increased signifcantly. On realestate.com.au, the top keyword with the largest increase in searches last year was ‘dual living’, followed by ‘granny fat’.

What Are Granny Flats and Dual Occupancy Homes?

Granny fats and dual occupancy homes typically share the same property without the need for subdivision.

A granny fat is smaller than the main residence, while dual occupancy homes are usually about the same size as the primary dwelling.

Wally Gebrael, builder and director of NSWbased Granny Flat Solutions, noted the growing popularity of these smaller dwellings.

“Many customers say that it’s cheaper to invest in their property and provide another house— whether it’s for family or as a rental—than it is to buy another property,”

Gebrael said. Costs and Construction Time

A two-bedroom granny fat costs between $180,000 and $200,000 on average and takes about four months to build if not prefabricated. “Investors are a big group for us,” Gebrael said. “A lot of property owners with large backyards or investment properties build a granny fat to gain additional income.”

Benefts for Homeowners and Renters

Investors favour granny fats because they don’t require subdivision, saving time and money.

Homeowners also build granny fats for family members, either for downsizing or to provide housing for children who can’t afford to buy their own homes. “The returns can be signifcant when you compare the amount borrowed to the potential rent,” Gebrael explained. For renters, granny fats offer an affordable alternative to houses.

Nicole Astudillo, property manager at Ray White – Wetherill Park/ Cecil Hills, said granny fats are popular and quick to lease. “Granny fats usually have two bedrooms and are more affordable than houses, appealing to individuals, couples, and young families,” she said.

Policy Changes and Market Trends

Policymakers are cutting red tape for granny fats and dual occupancy homes to help alleviate the housing crisis. Recent changes include:

• Western Australia: No planning approval required for compliant granny fats up to 70sqm.

• Victoria: No planning permit needed for ‘small second homes’ up to 60sqm on properties of at least 300sqm, though a building permit is still required.

• South Australia and Queensland: Rules changed to allow granny fats to be rented to anyone, not just immediate family members.

• New South Wales: Homeowners can build a compliant granny fat without traditional council approval.

Paul Ryan, senior economist at PropTrack, stated that cutting red tape is helping increase housing stock. “Granny fats are becoming easier to build and are a fexible way to use existing housing blocks,” Ryan said. “The housing crisis is pushing the granny fat trend as a way to get more housing.”

Considerations and Risks

Homeowners should research zoning rules, utility requirements, height restrictions, and the backyard layout before building. Chris McKillop, property valuer and Sunshine Coast director of Herron Todd White, warned that not all investments in granny fats will increase property value. “It’s specifc to the suburb and property. In some areas, you may recoup the cost, but in others, particularly those with high-quality homes, you might not,” he said.

Conclusion

Building a granny fat or dual occupancy home can be a smart investment, offering potential rental income and providing housing solutions amidst the housing crisis. However, it’s crucial to do thorough research and consider local market conditions to ensure the investment pays off. With careful planning, homeowners can make the most of their backyard space and potentially enhance their fnancial stability.