Granny flats are increasingly becoming a secondary source of income for property owners across Australia for those who understand how to rent and manage them properly.
If you’re searching for a way to supplement your income, it can be a good idea to rent out a granny flat. Not only can it increase your revenue from month to month, but it can also ultimately increase the value of your property. Plus, as it’s regarded as a fixed asset, you’ll have an easier time if you need to apply for financing.
From working individuals to small families to tourists, in Sydney there’s a big pool of potential tenants to whom you can rent out a granny flat. You’ll still need to do your due diligence and put in place systems to ensure that you find the right tenant for your new venture. Let’s look at what you need to keep in mind when managing and renting granny flats in Sydney.
These accommodations are often confused with tiny homes. While they’re similar, these are two distinct property types. In short, a granny flat is a self-contained house that offers all the important utilities and a high level of comfort. It’s usually erected in the backyard of a bigger family home.
That said, don’t be misguided by their size as they are available in one, two, or even three-bedroom floorplans. From heating to Wi-Fi to outdoor verandahs, they offer all the amenities that you could need, even though they’re only about 60 square meter.
New accessory apartments can sell for anything from $120,000 to $150,000. Considering how expensive houses are in Sydney, a granny flat can be a lucrative option for potential buyers.
With regards to its rental potential, the average rental price is about $400 to 500 per week. Though, if it’s in proximity to amenities like schools and transportation and it has a separate entrance and high-quality fit-outs, you can get as much as $650 per week. To give you an idea, if you rent out a stylish granny flat that cost you $100,000 to build at $400 per week, you’ll reach a break-even point in less than five years.
If you’ve done the math and it would make sense for you to rent out a granny flat, there are a number of crucial points that you must give thought to before you take the plunge. These include:
It’s key that you check the local laws first. For example, in New South Wales you’ll need to ensure that a certified accreditor approves it before you can start construction. If you skip this step and the structure is non-compliant, you run the risk of getting fined (as much as $1 million), especially if a tenant was injured or inconvenienced.
And, just because there’s an existing accessory apartment on your property, it doesn’t necessarily mean that you’re good to go. You’ll still need to check that it complies to the current standards before you can rent it out.
If you’re renting out a property, it’s crucial that you put in place some screening process before you decide on a tenant. This step is even more important when you’ll be renting out a granny flat as the tenant will be living on the same property as you.
To help prevent problems down the line, you should get personal and employment references. That said, they’ll be of no use to you if you don’t actually make the time to follow up. In addition to getting photo identification, it’s also a good idea to meet the tenant beforehand, if you won’t be using a property management company.
As the owner, there’s also one thing that you can do from your side to ensure that the whole process and experience is smooth sailing. This is to be honest and open about your property and what it offers.
What are the perks? What are the downsides? Perhaps the neighborhood is a bit noisy? By being completely open about your property, you can minimize the chances that there’ll be a misunderstanding later on.
Once you’ve found a potential tenant, you’ll need to get the terms of the lodging agreement in writing. This is one of the most important steps and will ensure that during the time that you rent out the granny flat, both parties have a document to refer back to in case there’s a question. In short, the terms of the contract should detail all the rights and responsibilities of both parties.
Here are some of the primary matters that you should cover:
If the apartment receives a separate account (in other words, the premises are separately metered) for public utilities like water, electricity, and gas, you can refer to the relevant acts about residential tenancies. Here you’ll find information regarding how to deal with rent and other payments that the tenant may be required to pay.
Though, if there’s no separate meter for any of these utilities, the landlord and tenant must enter into a written agreement about how the total consumption charges for the share of the tenant will be calculated.
If you need to end an agreement before it expires, you’ll generally need to give the tenant 60 days of notice. The rules about ending this type of contract are very strict. It’s best to double check with your local authorities first.
Keep in mind that the tenant may also request an end to the agreement before the originally determined date. There are guidelines that stipulate these too. For example, if the tenant is the victim of family violence, they are allowed to give much shorter notice.
Our team is experienced at transforming unused backyard space into an opportunity to generate a passive income. Property prices in Sydney are soaring, and you have a big target audience to whom you can market a granny flat rental.
Alternatively, if you simply want to invest in an apartment for extended family, we can help with that, too. We’re a family builder so we’ll treat your property like our own. We’ll create a customized design that will meet your needs and guide you through all the different phases that are involved in building an accessory apartment.
When you partner with us, you can look forward to a stress-free experience so that you can focus on what matters most – your new granny flat. If you would like to find out more, call us on 04 9191 3030 or get in touch to organize a free consultation.