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Why Granny Flats are FREE – Just a bold Statement?

Here at Granny Flats Sydney, we provide free advice to all of our property investors. We get many phone and email inquiries ranging from approval, granny flats rent info and design questions, to investment and  finance queries. An important question is about the feasibility and cost effectiveness of granny flats. Do the numbers stack up? Will you make money from a granny flat?

In this article, we’ll discover that it’s important to avoid certain pitfalls in ensuring your new granny flat works for your investment portfolio. We’ll reveal how to ensure your granny flat costs you a grand total of zero dollars! That’s right, granny flats can be a free investment if done right. So firstly, let’s do the rough numbers.Free Granny FlatsGranny Flats are Effectively FREE

A Free Granny Flat You Say?

Yes, Granny Flats can be FREE!  Let’s take a look at the figures. You have an investment property which is either mortgaged or completely paid off. This doesn’t matter because you can apply for either an equity loan or a construction loan. You borrow 100% of the build cost which we’ll set at $100,000. You build your new granny flat, ensuring of course that your site is attractive to tenants. This is vitally important as we’ll further discuss below. But back to the maths. You rent it out for $350 per week after costs. This is an average rental return as reported by hundreds of our clients. So this equates to just over $18,000 per annum. Now, your tenants are paying back the loan at a rate of $350 per week. The time taken to repay the loan plus interest is roughly 5.5 years. We’ll say six years to be more conservative.

So what does this all mean? It means you have initially risked $100k to have it all fully repaid (with interest) by your tenants within six years. After this, all rental income is yours. All of it. Forever. So you have not only achieved a granny flat for free, but you have also ensured an income of $350 every week for life and beyond! Now do this to five properties and you can only imagine the income you can achieve! The property will also be positively geared, meaning your rental return from both tenancies is higher than your mortgage repayments. This is not a fantasy. We have clients moving onto their fifth granny flat right now!

What about the Pitfalls?

This is where we’ll talk about what not to do. That is to say, we want to embark on this journey with words like ‘privacy’,  ‘separation’ and ‘vacancy rates’ always on our minds. The reason I am emphasising these terms is because knowledge of what property to buy is so important. It’s vitally important to find the right “granny flat friendly property“. We actually discuss this in many of our articles because:

1. We want you to prosper!

2. We want our clients to be well educated on what to look for when hunting for a property.

3. We want to minimise your construction costs.

4. We want to maximise your profits.

5. We want to minimise vacancy rates.

6. We want you to build five or more granny flats, hopefully with us!Quality Investor Granny Flats – Sydney

Five Granny Flats?

That’s right, five (5) or even more! Many of our investors are just now building their fifth granny flat in as many years. When they retire, at say age 65, they’ll have an income of around $4,000 per week from five dual-tenanted properties. The out-of-pocket costs = zero dollars!

These are enviable statistics BUT all of these successful property investors have thoroughly read our guides and they practice smart buying. The many tips and guides in this website cover topics such as buying property, innovative design, and many other undiscovered ways to boost your granny flat’s attractiveness to tenants. We cover sound insulation, using trees in your favour, dealing with sewer and drainage issues and all of the associated costs. We provide case studies which show how we were able to mitigate  a ‘bad block’ and turn it into something that will maximise rents.

To give you an example, a property might be burdened with a significant tree and sewer in the rear yard. The price of the property might still be viable for granny flat development once we carry out Stage 1 of our granny flat approval process. We create a ‘Build Zone Map’ which clearly shows red zones and green zones for building with privacy and separation in mind. We also take survey levels to determined the best foundation system and materials to suit your property. There are many other areas we investigate including suitable access, parking, privacy and separation to name just a few. All of these facets are critical elements in planning for the future of your granny flat development. Not sure whether a property looks ok? Just email or call us with an address. We’ll check it for you- and it’s free!

Better still, we teach our investors to check for themselves so that they can jump on a property as soon as it becomes available. Finding the right property for granny flat development is becoming increasingly difficult and we sense that this will continue. So it really pays to get educated! We encourage you to read our many guides and articles on this website. There’s bound to be ideas and tips here which you have never thought about before. We’re here to help you with:

1. Efficient ways to search and find the right granny flat friendly property. This includes using the internet, buyers’ agents and other methods.

2. Being mindful of creating privacy and separation between tenants. Read on. Below we discuss using strict site measuring techniques which will make the selection process simple and more methodical for you.

3. Factoring in all of  the extras such as internal fences, landscaping, parking, heating, cooling, maximising storage space and even the clothesline!

4. Find and employ the right real estate managing agent.

5. Finding and employing the right granny flat builder who is experienced in building these dwellings every day. We only use builders who know how to deal with specific site and tenant hurdles.This means knowing how to mediate for access to water, power and material deliveries to name a few. These are all very important to ensuring a smooth granny flat build process.

Site Inspections

Take a Tape Measure!

When you visit a site, take a tape measure. A tape which measures up to twenty metres is ideal, but you can also use a normal 8 metre tape and just use a marker to continue measuring. Forgot your tape measure? You can use an average adult’s step to roughly measure a metre as well. Another method is to open ‘Google Earth’ and use the ‘tape measure’ tool at the top to approximate critical measurements. Below, we show you just what to measure when you go out for that critical site inspection!

Our Property Hunting Guide!

TIPS (in order of importance):

  1. Minimum 15 m from house (wall) to back boundary. 18m+ is preferred.
  2. If block slopes (falls) to the rear, minimum setback should be 20 m from house to back boundary UNLESS the block is 15m wide or more. Then it can be 15-18m+ to the rear boundary.
  3. If it’s a normal block (not a corner block or lane way at the rear), look for a 1.5m+ setback from the house to the side boundary on the side opposite the driveway. Reason is to allow a separate walkway entrance for,your granny flat  tenants.
  4. Block sloping to the street is preferred. This will avoid approximately $2,500 for a dispersion pit and allows a lesser rear setback. Read our Drainage Guide and Sewer Help Guides for further tips with this.
  5. Corner Blocks are awesome- just make sure the distances mentioned above are still true.
  6. A Laneway to the  rear (or side) is great!
  7. No significant trees in the middle of the yard. We need to build at least 3m from significant trees. Significant means over 5m high and native. E.g. palms are ok to remove regardless of height.

There are many more news guides on this website aimed specifically at educating our clients on all aspects of granny flat approvals, designs and best building practices. We hope this has helped you to see how granny flats are a fantastic wealth creation vehicle. As discussed, finding the right property is really the most important decision you’ll ever make when building granny flats in Australia.

Serge Panayi

Principal – Granny Flats Sydney (NSW) Pty Ltd