If you need to generate additional income to pay off a mortgage or buy a new property a granny flat is the perfect opportunity to capitalize on an investment in a relatively lower margin.
Granny flats offer very high investment returns of between 15-25% depending on location, size and quality of dwellling.
Either at the back of your home to earn extra income or if you have an investment property with only one house on it, you are likely to turn a negative geared investment into a positive one i.e. from making a loss into a profit.
There are numerous financial benefits like depreciation deductions, and if you have a self managed super fund you can use these funds and/or borrow money to invest in a granny flat, thus taking advantage of a lower tax rate of only 15%.
Lets do the math, if for example a Granny Flat costs $100,000, and it receives a rental return of $380 per week*, at an interest only rate of 7.5%… you will achieve an incredible return of $236 per week (after interest repayments) – which is a return on investment (ROI) of 19.8% per annum.
Another example, we recently built a 60m2 granny flat with decks at the back of a client’s home on the northern beaches of Sydney. The first person to look at it snapped it up and is paying the weekly rent of $595 per week, giving the owners a gross return of over 20%.
The results speak for themselves.