Will A Granny Flat Help You Create Passive Income?

It is true that many property owners build granny flats out of necessity to house their loved ones, but have you considered that building a granny flat will help you create passive income or boost your retirement strategy? Maximising your passive income is possible even without buying a new block of land provided that your current block is large enough to meet all the latest Australian granny flat building specifications. If you haven’t considered building a granny flat on the back of your initial property, then it might be worth thinking on it for a while to contemplate whether it is the right move for you.

Building a granny flat on a property to increase your equity and selling it for profit is one of two actions you could consider once the granny flat is finalized, although it is worth noting that it will only bring a return of investment of approximately 70%. The second action is actually choosing to hold onto the property and using it to directly increase your passive income.

As granny flats tend to be either one or two bedrooms and are built in conjunction to the principal dwelling (either attached or detached), these could easily be used as rental income to help, a) reduce your initial mortgage, and b), increase your passive income over and above your mortgage expenses.

Generating extra sources of income is made much easier through the construction of a granny flat. These funds can be used to increase your passive income in both the short-term and long term depending on the location and size with relatively low risk other than the cost of construction. Increasing the equity value on your land will also put you in a more positive position for lenders if you wish to invest in more property in the future.

Securing your future with a granny flat is a smart prospect due to their cost effectiveness, particularly as there are also additional benefits such as tax depreciation and capital growth. Remember, however, as with any investment, there are risks involved, and these tend to be associated more with your inability to be able to find a suitable tenant to rent the property on an ongoing and long-term basis. If you have done your homework, then rising housing prices and lack of affordable housing may also work in your favour. Because of these two factors alone, the rules to building granny flats have been reduced and it takes very little time to get final approval to start your building project.

If building a granny flat seems like the right solution for you and is a feasible approach to building up your passive income, then it’s time to do your research. The NSW Planning Portal has all the latest information on granny flats including how to lodge an application.