House & Granny Flat are very popular in NSW as they have many benefits, from an investment as well as a personal perspective.  This blog will look at it’s definition, pros, cons, which builders are best to build them, whether to use DA vs. CDC and how much it costs to build a house & granny flat.

Definitions

House & Granny Flat

A House & Granny Flat is a form of a dual occupancy dwelling.  A dual occupancy means TWO occupancies in one block of land.  Duplexes are also considered to be a dual occupancy.

Granny Flat

A granny flat is a self contained smaller home that’s built on the same block of land as your main home.   Essentially you have a main home and a Granny flat (generally a maximum of 2 bedrooms) all in one block of land.

Design

Here is an example of a single storey home with a granny flat.  I don’t own this design but I am using it for illustrative purposes only.

As you can tell, the granny flat is attached at the rear of the main home.  Now granny flats do not have to be attached to the main house.  They can also be detached if you have a big enough block of land.

Pros

  • Independent Living
    • whether you are building it for the parents or for the kids, granny flats provide for a great independent living.  Essentially, living together but separate or independent.
  • 2 Generations
    • they allow you to have close family and loved ones close by specially as your parents get older
  • Low Maintenance
    • they have low maintenance and cost of upkeep is relatively minimal (depending on tenants and build condition of course)
  • Great Yields
    • spending less than $140,000 to build a granny flat, renting it out at a minimum of $300 per week (this is mainly in the Sydney area) – they are great have a fantastic rental yields.
  • Added Value
    • they do add great value to the price of your property and widens the net of potential buyers
  • Additional Income Source
    • they provide a great source of income that can help pay for your mortgage.  Some of my clients say that it pays for up to 40% of their total interest repayments – how good is that?!!
  • Good Money Savers
    • they are great for elderly couples or young couples who want to rent and save some dollars
  • Guest Home
    • you can potentially use them for a guest home if you have more frequent visitors who tender to stay at your place
  • Tax Benefits
    • Potential depreciation advantageous however please talk to your accountant or financial planner around tax and investment advice

Cons

  • Stranger Alert
    • when renting it out, you are essentially having a stranger living too close for comfort specially if they are more difficult tenants
  • Misleading Build Price
    • A lot of builders tell you that it will cost you $70,000 or $80,000 to build a granny flat.  What most builders don’t tell you are all the exclusions / inclusions that do NOT come with it
  • Misconception
    • as at the time of writing this blog, granny flats cannot be subdivided and sold off separately.
  • State Dependent 
    • granny flats are not allowed in every state of Australia
  • Harder to Rent 
    • sometimes, they might be more difficult to rent out compared to a stand alone home
  • More Council Rates
    • you get the pleasure of paying council more money
  • Reduced Value
    • in some occasion, it can decrease the value of your home or reduce your pool of potential buyers
  • Excessive Contribution
    • There might be some really excessive council contributions.  For example:  Camden Council charges ~ $40k when you build a 2-bedroom granny flat (at the time of writing this blog).

Attached OR Detached?

So which is better?  Well the answer is “it depends”.  If you have a relatively smaller block, then an attached granny flat can prove the better way to go.  However if you have a massive block of land or a corner block that allows you to do a detached granny, then go for it.

Please remember that Detached Granny Flats can be less desirable to rent if it sits at the far end of your block.  This is because tenants will have to walk a greater distance to get to their home.

Now this may sound silly but the reality of it is that when people have so much choice, they will generally pick an attached granny flat that’s close to the street than one sitting all the way in the rear of your backyard.

A common concern is noise as you do share a common wall with the granny flat.  This common wall is a party fire rated wall that is sound insulated.  Your chances of hearing your next door neighbor putting on loud music is pretty much similar to hearing your granny flat neighbor putting on loud music.

Having said that, I wouldn’t let noise be the driving factor to build detached granny flats.

Another note is that it can cost you a little more to build detached granny flats.  This is because your builder will have to run the services for a much larger distance into the rear of your backyard amongst other factors that you may not have with an attached granny flat concept.

One last point to consider is that attached granny flats do allow you to have a bigger backyard for your main home.  This is because there is no wasted space with the extra setbacks that you have to take into account when building a detached granny flat.

The Best Builder

This is a difficult question to answer but to put it simply:  a builder who is geared to build house & granny flats.  A lot of volume builders that do single dwelling homes will find building house & granny flats far more time consuming, so they will want to charge more for it.

Now I am ok for builders to charge the right price, but I am very opinionated when it comes to charging customers for inefficiencies of their processes.

I find that only a select few volume builders can build house & granny flats more effectively and efficiently.  Small & Custom builders are generally more effective but can cost more.

Custom Project Builders are probably best suited for this type of build.  It all goes back to what a lot of my blogs are about:  choosing the right builder is the key!  It’s worth reading the 4 categories of builders to get an idea about choosing the right builder for your home & granny build!

DA vs. CDC

As it stands today, you need a minimum size block of 450sqm to build a house & granny flat.  This is through the NSW SEPP (CDC) and a lot of the Local Council LEP / DCP (DA).  However there are some councils that do allow you to build house & granny flats on less than 450sqm blocks of land.

Which pathway should you choose?  Well, it all comes down to your requirements and which legislation stand better to satisfy your requirements.  DA takes a little longer so inherently costs more time and money.  CDC can be much faster and more cost effective.

It’s important to note that while I state the obvious fact above re minimum site size requirement, you can actually build a house & granny flat using CDC on block far smaller than 450sqm.  You just have to find a builder who is clever enough and understands the codes to make this happen for you.  But it is possible (well at the time of writing this blog of course).

Where do I start?

Here is a general set of steps that I suggest you take:

  • Can you actually build a house & granny flat?
    • you can research this by visiting your local council or checking your LEP / DCP / SEPP.
  • What can you build?
    • build size, setbacks, FSR (floor space ratio), GFA (gross floor area), site coverage, etc…
  • Who is going to build it for you?
    • choosing the right builder is the key!

  • How much is it going to cost?
    • always make sure you take into account the TOTAL cost.
  • What are the hidden costs?
  • Have you accounted for unknown / unanticipated costs?
  • There may be council contributions, have you called council to confirm?
  • What else?

How Much?

So how much does it cost to build a house & granny flat?  This is a really generic questions that is not easy to answer.  There are some factors to consider here that will make up the price:

  • Level of Inclusions
  • Turnkey Solution vs. Non-Turnkey Solution
  • Separate Services – are they included or not?
  • Quality of Finish
  • & most importantly, Quality of the Builder
  • Floor Plan Size
  • Complexity of Design
  • Site Costs and Authority Costs

Generally, for an investment (and depending on location of course), you would be looking at between $400,000 to $600,000.  However if it’s your family home, then it just depends on how much you want to spend.

A Note

Always research your local market and determine whether it’s the right choice to build a house & granny flat.  If you are building them for the family to live in, this may not be as important!

Most importantly, always do your due diligenceChoosing the right builder will help you get a more accurate figure and keep things tight and smooth sailing for your building journey.

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