Hi
Could you advise me as to the advantages and disadvantages on building a simple house and building a granny flat in the backyard of my property? the purpose of the new accomodation is so that we can rent it out. I was advised by some real estate agents that the cost of building a granny flat would be about $80 – $100K and building a new house would cost $150K. are there any more costs associated with building the new house?
Thanks for your help.
Hi Jer29e,
Yes the cost of building a GF is between $80k-$100k. The benefits of a GF is that you may be able to build the GF without DA. The cost of building a house is minimum $150k and could cost up to $500k depending on the finishes and the size. If its an IP I would recommend using a kit home builder such as Wincrest, etc. A custom designed house will cost you much more. There are other costs which you need to factor in such as site costs (is the land level or steep, does it have rocks, etc) and the DA and CC costs. From a finance perspective make sure that your builder is a licensed builder.
Back to the GF – which area are you considering of building (as it may not be a good return on investment in some areas)?
Regards
Shahin
TheFinanceShop | Elite Property Finance
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It seems to be an issue of semantics. What you are talking about is building an additional dwelling of modest size and finish. A dwelling of say 75m2 is adequate for a modest 2br dwelling, and at a construction rate of say $1,500/m2 with planning and design costs on top of that, you can establish a budget fairly simply.
75m2 x $1,500 = $112,500
Plans and permits = $20,000
Total = $132,500.
From there you have a starting budget and you can use that to establish the prospective yield (ROI)
$132,500 x 8% = $10,600 / 52 = $204/week.
If you believe you can rent for $204/week, then you have a yield (before depreciation) of 8%
Building a GF would be a much better idea I think. Besides increasing the value of your property, you can also rent it out once it’s done. If that idea doesn’t appeal to you, you can also transform the GF into a home office, workshop or even a storage space. It costs cheaper to build too.
Building a GF would be a much better idea I think. Besides increasing the value of your property, you can also rent it out once it’s done. If that idea doesn’t appeal to you, you can also transform the GF into a home office, workshop or even a storage space. It costs cheaper to build too.
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