In this video, Colin Fragar, our founder and CEO, shares five reasons why granny flats are a good investment.
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Or for those that prefer to read, here is a transcript of the video…
Five reasons why a granny flat is a good investment. My name is Colin Fragar from Council Approval Group.
So I’m in the studio today and I’ve had the question: Are Granny Flats A Good Investment? I’d like to share with you 5 reasons why I believe that they are a good investment.
Now this is coming from myself, from my personal experiences, as well as from thousands of clients that we’ve worked with. So I know that a granny flat is a good investment because of these reasons.
1. Approval Process
So the first one is it’s fairly easy approval process. Now, that doesn’t mean that it’s a breeze. It still needs to go through quite the preparation process. However, it’s not as complicated as, obviously, a subdivision or a multi unit housing. So that’s the first one, don’t presume it’s going to be smooth sailing but, if you can get it in the bag, it’s probably a lot easier process than the other development types that may be available.2. Low Investment
Okay, the second is it’s a fairly low investment. And I want to give you caution here, please don’t go with one of those really budget builds for a granny flat that’s just basically a tin shed in the backyard. My experience has been, having done three of these myself now, is that if you put a little bit extra into the build you’ll end up getting a higher return. Which brings me actually to my third point.3. Return on Investment
The third reason why I believe that granny flat is a good investment is of course that you improve the yield of the property. And if you were to do the calculation for return on investment, if you look at the denominator being the bottom of the equation, the actual cost to construct compared to the rent yield that you’ll get is quite high.As a proportion to the capital investment that you’ll make, it’s actually a higher return on investment than a dual occupancy or a house itself.It’s quite disproportionate. And it’s quite interesting when you look at it. You think how can I get such high rent for such a low capital investment? But please don’t go too low.
4. Pay Your Mortgage
Okay, that was point number two and three. Point number four is that it actually helps to pay your mortgage and this is kind of nice. Now, if you’re living at the property and you build this extra, this rental income significantly improves your quality of life. It’s not just a takeaway phrase. Reducing your mortgage actually, real life on the ground, improves your quality of life. And that has certainly been my experience as we have built one of these in our backyard and it’s taking massive financial pressure off our family.5. Add Capital Value
Okay, number five is it does add capital value. Now there’s a little bit of discussion around this. Does a valuer value the property higher when it’s got a granny flat or does it go up in proportions? We know that it doesn’t add as much capital value as for example, when you subdivide the property because you’re able to sell it off. Remember a granny flat can’t be separated in its title. However, it still does add capital value and what we have found with our personal projects and for our clients is he is actually able to reduce the debt level. Because of this, you’re able to reduce the debt level and you’re able to pull out some of that equity because of the manufactured growth that you’ve created.Next Steps
My name is Colin Fragar. Now please, if you would like to talk about your property, if you’re thinking about whether a granny flat is the right investment for yourself and you’d like to talk to one of our team, please book in for a consult. And if you haven’t already, please go to our website and make sure you grab a copy of Your Ultimate Guide to Council Approval which we will send to you. It’s got a whole bunch of tips and tricks in here about getting council approval for a granny flat which in planning terminology is a secondary dwelling. Thanks for joining us and I wish you every success.Article Last Updated: 28 June 2024