How it works
The calculator compares the property as it is with the property after adding a granny flat. It allows for the main house renting for a little less once the yard is shared, extra running costs for the flat, and the build cost added to your total investment.
Worked example
A $750,000 house renting for $600 a week. A $160,000 granny flat is added. The house then rents for $570 and the flat for $380.
| Before | After | |
|---|---|---|
| Total invested | $750,000 | $910,000 |
| Weekly rent | $600 | $950 |
| Gross yield | 4.16% | 5.43% |
| Net income | $22,600 | $37,075 |
| Net yield | 3.01% | 4.07% |
The flat adds $14,475 a year in net income, a 9.0% return on the build cost, paying back in about 11 years before tax and depreciation. It also turns a modest-yield house into a solid one, as our worked examples show.
Before you build
- Approvals: most states allow secondary dwellings on suitable lots through a fast-track approval, but lot size, setbacks and council rules vary.
- Who can live there: some councils restrict renting a secondary dwelling to people outside the household. Check before counting on the rent.
- Separate metering: lets you pass on water and electricity costs.
- Insurance: tell your insurer and update the policy.
- Land tax and tax: a second dwelling can change your land tax and the property’s tax treatment. A new granny flat may also count as a new build for the 2027 negative gearing rules. Get advice.
- Depreciation: a new build has strong depreciation claims. See rental property depreciation.
Frequently asked questions
Does a granny flat increase rental yield?
Usually. It adds a second rent for much less than the cost of another property. In our example it lifts net yield from 3.01% to 4.07%.
How long does a granny flat take to pay for itself?
Divide the build cost by the extra net rent a year. In our example, $160,000 / $14,475 = about 11 years, before tax benefits and any value uplift.
Does a granny flat add value to a property?
Often, but not dollar for dollar. Value depends on the local market and approvals. Get a valuation before relying on it.
General information only. This calculator and content do not consider your personal circumstances and are not financial, tax or legal advice. Speak to a licensed professional before making investment decisions.