Are Granny Flats Worth Buying? Insights from a Buyer’s Advocacy Perspective

If you’ve been following recent trends in the world of real estate trends, you may have seen a steady rise in popularity of granny flats. This popularity has left many people wondering if a granny flat is worth buying and a viable option in the long-term.

From the chance to earn extra income to flexible living and capital growth, there’s no doubting their appeal. But is investing in a granny flat the right move? In this article, the team from Dual Dwelling Investments will cut through the noise and give you the honest opinion of a buyer’s advocate who knows the industry, the trends, and what is in it for you.

What is a Granny Flat?

First things first – what is a granny flat? It is a self-contained dwelling located on the same block and under the same title as the main residence. They are smaller than the main residence, usually with just one bedroom, a kitchen, bathroom and living space.

Granny flats are generally used to house family members, often parents, hence the name. They can also be used to rent out and get some income to help with your mortgages. Some people even build them as home offices, rather than have the working space in the home.

Is Granny Flat a Dual Occupancy?

No, generally granny flats are not considered a dual occupancy under a Torrens Title. Dual Occupancy generally requires the second building to be large enough for a small home. Granny flats are smaller than a second dwelling, cannot be subdivided nor sold separately from the main house.

Granny flats always remain on the same title. They cannot have a separate title nor be a part of a Body Corporate. They have simpler permit approvals as well. This is good news for you if you’re looking at investing in and buying a granny flat.

Knowing exactly where a granny flat sits, legally and financially, compared to a full dual occupancy is the kind of detail a buyer’s advocate checks before you ever put in an offer, so you know precisely what you’re buying and what it can (and can’t) do for you down the track

Average Prices of Granny Flats Statewide

The average price for a granny flat in Australia has risen quite a bit over the past five years. This has been due to material and labour shortages, which can be attributed to the disruption that COVID-19 lockdowns produced. Also the growth in demand for granny flats has pushed their prices higher.

Currently, a 1-2 bedroom granny flat, with no bells or whistles, can cost between $80,000 and $160,000. Customised designs and other features can push that price closer to $200,000.(source- HiPages.)

Average Price Ranges by Type (2025-2026)

• Basic/Small (30-40m²): $80,000 – $120,000.
• Mid-Range (40-60m²): $120,000 – $170,000.
• High-End/Large (60-80m²): $160,000 – $250,000+

(Source – HiPages.)

Statewide and Regional Variations (2026 Data)

• Melbourne (VIC): $120,000 – $250,000+.
• Brisbane (QLD): $110,000 – $220,000+.

(Source – Granny Flats)

In Victoria, late 2023, regulatory changes allowed for smaller second dwellings to be built without a planning permit. This streamlined costs and efficiency, and further increased demand for granny flats.

Please note that these prices are averages. A Buyer’s Agent, such as the team from Dual Dwelling Investments, will help find you good value for money and a strong price point.

Potential Rental Income From Granny Flats

Granny flats in Australia can generate some strong rental income for you. Typical 2-bedroom granny flats, in Sydney and Melbourne, can earn you up to $600 per week. This translates as an almost 15% ROI, with the potential to pay for the construction costs of your granny flat within 8 years.

(Source – realestate.com)

The key things to remember with renting out granny flats is:

• There is a high demand for rental accommodation, especially in urban centres and near city centres.
• You can get a high yield from a granny flat investment, with 10-12.5% gross yield, which can outperform many traditional rental investments.
• Having a granny flat increases your property value, so it helps in more than one way.
• You can save money on real estate agents. As the rental property is right there, you can repair and monitor the situation without having to pay fees.

If you modify the granny flat, give it a separate driveway entry, some private fencing and a distinct outside area for itself, you can increase your rental demand even more.

Getting these numbers right for your specific property, rather than relying on averages, is exactly where a buyer’s advocate adds value, helping you assess the realistic rental upside of a site before you commit, not after

Do Granny Flats Add Value to a Property?

The short answer is – yes. They can increase the value of your property by up to 30%. A granny flat increases your property’s market appeal by having the potential for rental income under the one title. Purchase the home, and you get the granny flat as well.

When considering a granny flat to improve your property value, make sure it is well designed and fits with the aesthetic of your home. If you squeeze a large granny flat into a backyard that is a little small, you’ll severely limit the outdoor space and this can hamper the increased value of your home.

Also, adding a granny flat may have some capital gains tax implications, so check with those in the know, such as the team at Dual Dwelling Investments, if this impacts you.

For a maximum ROI for your investment, build a well-designed granny flat. Focus on quality that will appeal to a wider range of buyers.

What to Look for When Buying a Property With a Granny Flat

As buyer’s agents, we know very well what to look for in a granny flat. Here are some tips from us at Dual Dwelling Investments, to you.

1. Check that the structure is legal. Has the granny flat been council approved and is there documentation saying this? Is it built to building standards? For example, in Victoria a granny flat must comply with size constraints and set backs. If you have bought a granny flat that is illegal, there can be serious insurance problems and financing problems.
2. Council Zoning Laws. The laws differ for each local council so make sure the granny flat complies, especially if you’re thinking of renting it out.
3. Utilities. Does the granny flat have separate or combined utilities? Combined is okay if you’re using it for extended family or a home office. Separate utilities are best if you’re looking at renting it out.
4. Privacy and Access. If you’re renting it out, your tenants are entitled to quiet enjoyment and a right of privacy. Separate driveway and adequate distance from the main dwelling need to be considered for this.
5. Taking up the Backyard. Some people like to get a big granny flat, but don’t factor in how crowded their backyard is going to be. You don’t want to take up too much of your backyard. It reduces the enjoyment of your property and won’t give you as much of a boost to your property value as you think.
6. Check the Potential Rental Value. The statistics we’ve given in this article are a range. You need to check what you can potentially gain from a rental income. Ask your buyer’s advocate, research online. Based on factors like access to public transport, it might not be as high as you’d like. A high rental request means your unit could be empty for some time.

Common Mistakes Buyers Make With Granny Flat Properties

If you don’t follow the tips we gave you above, this is what may happen to you when going to buy a granny flat.

Regulatory and Compliance Mistakes

Be wary of marketing language. If a house listing says- ‘granny flat potential’, that doesn’t mean anything has been approved. It’s just a way to grab your attention. You can enquire with the local council if a granny flat can be built.

Failing to check compliance before you buy can lead to fines and insurance headaches. If a house has a converted garage, for example, ask to see the documentation that shows it was approved.

Check local regulations and restrictions. For example, in some places in Australia, granny flats can only be rented out to family members, not the general public.

Financial and Investment Burdens

A granny flat does not guarantee a higher resale value of your home. If you decrease the backyard space by putting in a granny flat that is too big, you can actually lower home appeal and decrease the value of your home.

If you spend too much on putting in the best, customised granny flat possible, or you hire cheap labour and they install it badly, it can be difficult to recoup your investment outlay.

Don’t overestimate how much you can make from rent. You may read about how you can earn so much rent, however if you don’t have things in place to help with peaceful living and privacy, you may need to reduce the rent. Shared driveway means no personal access means you can’t get as much rental income.

Another trap to look out for is overestimating rent while underestimating the costs. While you may have a few things wrong with your house that you’re leaving for a rainy day, if you rent a granny flat, tenants are entitled to have a property that is maintained and repaired when needed. You will have higher maintenance costs, insurance costs and utilities, if they’re shared.

We recommend obtaining a detailed feasibility study on the property, conducting proper council checks and investigating the local rental market, before you sign on the dotted line.

How Dual Dwelling Investments Can Help You Find the Right Property

Our team acts for you. We’re not trying to find a high-priced dwelling to help a real estate person get more commission. We are here to find, assess and secure, good value properties, for you. You tell us your ‘must haves’, your ‘it would be nice to have’ and the things that would be a ‘definite no’. Then we go out, find properties that fit your criteria.

We have access to off-market listings. We may be able to find a property, with a great big backyard that can fit a granny flat in the back, before that place comes to market. This saves the buyer money on marketing, it can move a property through sale quicker, everyone wins.

We do the due diligence for you. We can determine a property’s true value and the expected value if you choose to get a granny flat. We can investigate council laws and zoning laws that would impact the addition of a granny flat.

Contact the team at Dual Dwelling Investments and we can help bring a positive cash flow, boost the value of your home, and allow you to have family move in if you need. If you have the ability, then we believe a granny flat is a great investment.