The 2021 Guide To Granny Flats In Australia

 In Granny Flat FAQs, Granny Flat Ideas

Welcome to the ultimate guide to granny flats!

With housing prices on the rise, traditional real estate is often out of reach for many Aussies looking to kick start or grow their property portfolios. Cue the cost-effective yet comfortable granny flat.

A secondary dwelling attached or separate to a main residence on the same lot of land, this ‘property within a property’ is completely self-contained. With its very own entrance, bedroom(s), kitchen, laundry and bathroom facilities, the smart setup will allow you to maximise – and potentially even monetise – that extra space in your backyard!

These small builds offer big opportunities, from low-cost, lucrative rental ventures to long-term living solutions for loved ones.

But whether you plan to lease it out or keep it in the family, know that a granny flat is not a foolproof pursuit. As with any construction project, there’s an element of risk involved if approached the wrong way.

The good news? We’ve done all of the homework and heavy lifting for you! This comprehensive guide is here to help you get your granny flat off the ground without the stress.

Below, we’ll take you through a full rundown of all things granny flat, including why they’re more popular than ever, how much they cost, what designs are possible and how to go about the approval process.

Let’s get started!

Why Build a Granny Flat?

The Entrance granny flat

Whether you’re after chunky rental returns or private accommodation for your nearest and dearest, granny flats bring plenty of benefits for various types of property owners. Let’s count the ways.

Scalable Investment

First things first, a granny flat could earn you up to $12.5k per year!

Allow us to elaborate.

As we mentioned earlier, housing prices throughout Australia’s major cities are on the rise, making it increasingly difficult to secure affordable rental accommodation in sought-after areas. That’s where the granny flat comes in! A smart solution for tenants and an extra source of income for anyone with backyard space to spare, it’s safe to say that granny flats are a win-win.

And if you’re keen to get on the first rung of the property investment ladder, buying and building a granny flat behind your primary residence is usually a more affordable process than purchasing a whole new property. That means you can kick start your side hustle without taking out a sizable loan.

Depending on your granny flat’s location, size and features, your investment could earn you hundreds of dollars each week, with the asking rent for granny flats growing more than that of houses and apartments.

And if you’re loving the returns (about 10-20% per year!), why not join the many granny flat owners who have transformed these extra earnings into a primary source of income? Buying more sites and building more granny flats, these smart investors are reaping the benefits of scalable, positively-geared property investment. 

But before you dive in, it’s important to consider all angles. Below, we’ve summarised the key pros and cons of granny flat investment properties.


  • Cost-effective investment. As it’s usually more affordable to build or buy a granny flat instead of a standalone investment property,  you can set your portfolio in motion without taking out a large loan
  • Extra earnings. Depending on your location and granny flat features,  your investment rake in hundreds of dollars in rental income each week
  • Convenient accommodation. If you, your mate or your family member need somewhere to set up camp, your granny flat is the answer
  • Boost in property value. Provided its legally compliant, your granny flat will increase your property’s overall value (more on this to come!)


  • Other people living on your property. You’ll be sharing your once-private backyard with renters. And with these on-site tenants come some potentially awkward encounters…
  • The cost of building your granny flat. Construction expenses may be add up beyond what you initially planned. That’s why it’s so important to work with a contractor you trust to provide an accurate, full turnkey quote before beginning the build.

If you weigh up these considerations carefully and choose to go ahead with constructing a granny flat, it might just be the best investment you’ll ever make.

Greater Property Value

Provided it complies with council regulations, a granny flat can boost the value of your property up to 30%– a big bonus if you ever plan to sell!

The degree of this increase depends on the nature of your granny flat. Complete with quality inclusions, optimal block positioning and a design that enhances your primary residence’s exterior, a granny flat could boost your site’s worth significantly.

More Space For Family

For many young adults, saving enough money to buy a first home is a lot easier said than done. A granny flat gives them a foothold – your son or daughter could contribute towards your investment, availing of an affordable housing option until they’ve gathered the funds to move out.

While they enjoy the independence of this separate and secure home within a home, you can reclaim your space and enjoy its peace and quiet! 

And when your child has well and truly flown the nest (beyond your backyard), why not transform this private accommodation into a holiday home, long-term rental, guest house or living space for elderly relatives? 

More on this below.

Cost-Effective Care 

Keep your loved ones close without compromising on their comfort or quality of care.

Relatives with disability

With a granny flat, your family member can enjoy the independence and dignity that comes with having their own private living space. Meanwhile, the proximity will give you peace of mind, making it easy for you to check in regularly and provide care when necessary.

With funding available through the NDIS, you can even modify your loved one’s granny flat to include accessibility features and organise at-home support for day-to-day living.

Elderly relatives

A granny flat can help you to keep your money within the family instead of handing it over to a nursing home – all whilst Gran and Grandad relish in the privacy and independence that their comfortable, new build provides. 

What’s more, you can make sure they get the familial support and custom accessibility needed. And with approval from an Aged Care Assessment Team, your loved one will also receive government-subsidised at-home care.


Granny Flat Prices

Hunter Valley granny flat

So, how much will a granny flat set you back?

With prices ranging from $20,000 to $250,000, its cost will depend on a variety of different factors, including:

  • Site reports, consultations etc.
  • Architectural design and building approval
  • Materials and construction
  • Finishes and extra features
  • Size

No matter your circumstances, construction plans or granny flat goals, it’s important to understand the total bill for your build before you go all in. We’re talking full turnkey price with all costs included, from site reports and service connection to plumbing and approvals – not the misleadingly-low starting quote advertised by many kit home companies!

We’ve collected price, quotes and data from over 9 companies from Sydney all the way
to Newcastle and here is what we can tell you on price:

  • A one-bedroom granny flat should cost anywhere between $100,000 –
    $120,000 full turn key
  • A two-bed granny flat tends to cost between $135,000 and $145,000
    full turn key
  • A three-bed granny flat tends to cost between $145,000 and
    $155,000 full turn key
  • Our research suggests the actual complete price is often in the range of
    $220,000-250,000 full turn key

And while we’re at it: please don’t fall into the trap of building your granny flat with any old contractor. You need a builder who knows this distinct type of construction inside and out, with a deep understanding of all regulations and considerations. With the expertise of a specialist granny flat builder, you’ll enjoy peace of mind that your build will be cost-effective and successful the first time around!

To find out more about the various factors that influence the cost of your granny flat, head over to our Ultimate Guide to Granny Flat Prices.

Enjoy CGT Exemptions On Family Granny Flat Arrangements 

We’ve got some good news if you’re building for family! Formal granny flat arrangements involving elderly relatives or loved ones with disability will qualify for a capital gains tax (CGT) exemption as of July 1, 2021 (its legislation is still in the works).

Under this measure, CGT won’t apply to the development, amendment or cessation of a formal, written granny flat arrangement – as long as the accommodation is for older family members or those in need of disability care.

Sorry landlords, but commercial rentals don’t count!

That’s because this exemption aims to support vulnerable family members by addressing a key deterrent to the creation of legally-binding granny flat arrangements. In the past, homeowners have often foregone such formalities to avoid CGT liability. Sadly, these informal arrangements lack any sort of legal protection against financial abuse or exploitation if relationships take a turn.

Expected to cover 3.9 million retirees and 4 million people with disability, this new measure is in line with the:

  • National Plan to Respond to the Abuse of Older Australians
  • 2017 Australian Law Reform Commission’s Report: Elder Abuse a National Legal Response
  • Board of Taxation’s Review of Granny Flat Arrangements

For more information, check out the Government’s press release.

A Final Word On Tax

Planning to rent out your granny flat? As with any rental property, you’ll have to pay tax on its earnings. The amount payable will vary according to your income tax bracket, marginal tax rate and tax deductions.

Now for the nitty gritty. Your eligibility for certain tax deductions will depend on whether or not your granny flat investment is negatively geared. If your rental income is less than both your loan interest payments and maintenance costs, then your property will be negatively geared and you can claim these expenses as tax deductions. If your rental income exceeds your loan interest payments, then you’ll only be able to claim maintenance expenses as tax deductions. 

With that spiel out the way, let’s leave you with something short and sweet: regardless of your granny flat’s gearing, you’ll be able to claim depreciation (up to $5,700 in NSW) as a tax deduction!


Custom Granny Flat Designs

Caves Beach Granny Flat Lounge

There’s no such thing as a one-size-fits-all granny flat – and any kit home salesman who tells you otherwise should be approached with caution! Just as with a traditional house, you should design this backyard abode to compliment your (or your target tenant’s) distinct lifestyle. 

Whether you want a roomy kitchen to feed the hordes, an outside deck for romantic sundowners or a snug space for one, it’s important to consider all of your options before locking in a layout.

But where do you start?

Begin With Bedrooms

We might be stating the obvious, but it’s important to remember that various sizes of granny flats suit different uses. By deciding on the number of bedrooms needed, you can narrow down your search for the perfect design.

One-Bedroom Designs

Starting at 36m², one-bedroom designs are ideal for maximising the use and value of limited yard space. The most affordable size available, these compact dwellings are best-suited to smaller plots and property owners wanting to build a: 

  • Guest house
  • Holiday rental
  • Base for Grey Nomad adventures
  • Cost-effective living solution while saving for a house deposit
  • More autonomous alternative to disability support or aged care accommodation
  • More modest home that will free up cash for the joys of retirement!

Two-Bedroom Designs

Have more space to work with? 

Whether building for your brood or future tenants, a two-bedroom granny flat offers cost-effective versatility at a minimum area of 60m². This easy-to-manage size accommodates a wide range of applications, giving you more living and storage space to play with!

Think a family-friendly AirBnB, a private home for grandparents complete with a guest room for carers or visitors, a beginner-friendly investment property or a strategic addition to a growing portfolio (done right, you could earn up to $500 per week renting out both bedrooms – not bad from your backyard!).

Typical applications for 2-bedroom granny flat:

  • Airbnb retreat
  • 1st-time property investors (a great starting point for young couples)
  • Seasoned property investors looking to purchase a 5th or 6th Granny flat to
    positively gear their property portfolio
  • Parents helping their kids save to get into the property market by providing a
    granny flat for them to live in while they save money for a deposit
  • Grandparents who want to be closer to grandkids
  • Grandparents who want to unlock the wealth stored in their primary residence
  • Families looking to care for Mum and Dad who are getting older and require more
    hands-on care
  • Families who want to avoid putting Mum or Dad into Aged Care

Three-Bedroom Designs

And now it’s time to bring out the big guns.

Large enough for a family of six, three-bed designs share the advantages of a traditional house for a portion of the price. You’ll enjoy ample space, privacy and – if you decide to lease it out instead of living in it yourself – rental returns.

A go-to for many savvy investors, a granny flat with this much sleeping capacity will not only add value to your property, but could also earn up to $750 each week as a rental property! 

Typical applications for 3-bedroom granny flats:

  • Airbnb retreat – typically in tourist hot spots
  • 1st-time property investors
  • Student accommodation, especially when located near educational institutes
  • Seasoned property investors looking to positively gear their property portfolio

Find The Right Granny Flat Floor Plan

On a related note, your floor plan can be the difference between daily delight and frequent frustration. So it’s important to get it right!

Take our lovely Elanora design. This family-friendly floor plan places the bedrooms and bathroom at the opposite end to the entertainment area – a clever layout that keeps the peace, no matter the hour!

Elanora granny flat floor plan

Want to see some more floor plans to find your perfect fit? Sign up today to explore all of our stylish and functional options.

*embed sign up form for floor plan brochure*

Looking For A Little Luxury?

If there’s one thing these efficient living spaces prove, it’s quality over quantity. Especially when it comes to designer granny flats!

Showcasing contemporary architecture in all its glory, these sophisticated designs take secondary accommodation up a notch. With bright, open spaces, sleek lines and premium features, designer layouts cater to those looking for a slice of luxury.

Top yours off with an elegant façade to compliment the primary residence’s exterior, and your property will have serious curb appeal. 

Sound up your street? Head over to our Ultimate Guide to Granny Flat Designs to explore your designer options (plus heaps more!).


Granny Flat Approvals

Steep slope & sandy construction site

Ah, the most tedious phase of any construction project… But we’ve got good news if you’re keen for a granny flat!

Before 2009, anyone planning to build a secondary dwelling in their backyard had to wait several months for approval. Not anymore.

The Affordable Rental Housing State Environmental Planning Policy was introduced to support the provision of reasonably-priced accommodation in NSW (and granny flats make the cut!). 

As a result, you can now submit a Complying Development Certificate instead of a dragged-out Development Application. This switch could speed up the approval process to as quick as 10 days!

Note that this time-saver doesn’t apply to every single build – your granny flat has to meet certain standards. To learn more about your eligibility, check out the Ultimate Guide to Granny Flat Approvals.

Make Sure To Play By The Rules

Before you begin your granny flat build, double check that your planned addition will abide by all necessary legislation. To help you get started, we’ve gathered some basic guidelines.

In general, your granny flat must:

  • Be constructed on a residentially-zoned property with a minimum size of 450m2
  • Be the only granny flat on this property
  • Have the same owner as the primary residence on the property
  • Provide a maximum interior living space of approximately 60m2
  • Be accompanied by its own, unobstructed pedestrian access

Get in touch with your local council to work out which rules and regulations apply in your area. For state-specific information, check out the resources below:

Once you’re confident that your project will comply with relevant requirements, you’re all set to apply for planning approval!

Get Started On Your Granny Flat Today

Central Coast granny flat - Backyard Grannys

And there you have it: our beginner’s bible to granny flat builds. From costs and benefits to design and approval, there’s a lot to consider before diving into development! 

But with these fundamentals laying the foundation, you’re now one step closer to getting started on your dream granny flat! Whether you’re based in Newcastle, Lake Macquarie, Hunter Valley or the Central Coast, our trusted team is here to help you make it happen. 

For a free site inspection, simply fill out the form below and we’ll get back to you as soon possible!

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