Tuesday, January 5, 2010

Adding a Granny Flat

If you have lots of space, or an unused shed in your backyard, you could consider a granny flat.

In one part of Sydney where we have an investment property, a studio granny flat can earn you up to $200 a week: a significant portion of the mortgage on a $250,000 block, and enough to make the property positive geared, when added to the $350p/w rent for the house alone.

In a tight job market (and an even tighter rental market) this, we considered, was insurance against the worst. At best, it would pay down the mortgage on the property faster, or the extra money coming from the flat would cover the cost of a loan to complete renovations on the house and increase the overall capital value of the property.

Remember, as a guide, that repayments on a $30,000 loan are about $50p/w so if you can do the build or the shed conversion for less than that, the other $150 p/w is just cream, especially if your property is already neutrally- or positively-geared.

Just remember that in some councils, even if there's a suitable shed on the property already (and fully plumbed), there may be regulations about distances from boundary fences. Penrith City Council in Sydney, Australia, has a regulation stating that a granny-flat may not be built within 3 metres of the back fence.

Unfortunately, our shed was less than a metre from the back fence, and there was only about four metres in front of it before the area we wanted to use as a courtyard garden for the flat met the back of our house. We didn't want to lose the courtyard as an entryway, or have the flat attached to our house!

This is not entirely the end of the world. The converted shed has potential to make a very nice studio or summer-house with the addition of glass doors along the garden side of the building. And, as the builder pointed out, as long as you don't put a full kitchen (i.e. a properly plumbed-in stove) into it, there's apparently nothing to stop the building being fitted out and rented out privately if a toaster-oven or microwave is an alternative...

Just a thought!