The backyard shed or garage turned living space has certainly come a long way over the years, with many homeowners now opting to construct brand new granny flats that resemble miniature houses on their properties. 
Around Australia there’s been an increase in homeowners building granny flats – and the benefits are many, not least being accommodation for your extended family, providing a home office, or for generating rental income.
What is a granny flat?
A granny flat is a term used for a secondary dwelling on a property. They can be built attached to the main house or garage, or can be a separate structure. In some cases it can actually be cheaper to create a new building, as it does not interfere with the structure of the house – and this is one of the key reasons granny flats are growing in popularity as a more cost effective alternative to renovation. 
Granny flats are smaller than the primary home on the block, as they can only be 60 square metres in size. Designs are varied, some even consisting of three bedrooms plus kitchen, dining and living spaces, while others are simply one large space that acts as a home office or hobby space.
And the beauty is that these secondary dwellings can be built quite quickly, most going up in around 8-12 weeks.
Where can granny flats be built?
Granny flats can be built on most residential-zoned properties, but it is best to check with your local council in case there are some restrictions that may prevent you from constructing one on your particular block. The best way to do this is to purchase a planning certificate from the local council.
If your block is over 450 square metres in size and the granny flat does not take up more than 60 per cent of the property, your property should be eligible for a granny flat. If you opt to use one of the many specialist construction companies popping up all over the place, they can help you with figuring out if your property is suitable.
Do your homework 
To find out about current legislation surrounding granny flats, you need to contact your local council.
Depending on the size of your block, you may not even need council approval for building a granny flat, just approval from a private certifier, which only takes around 10 days. However, if you do need to gain approval from council, the process could take anywhere between 6-8 weeks (again depending on the council and its specific requirements).
Obviously it’s important to check specifics with your local council, but generally regulations include:
  • The owner of the granny flat must also be the owner of the primary dwelling
  • Each residential property is limited to one granny flat
  • They cannot exist on strata title, subdivided or community title property
  • They cannot be built on unoccupied land or on a property used for commercial purposes
  • They must have clear, separate and unobstructed pedestrian access
Why are they so popular?
These little dwellings have grown dramatically in popularity over the past couple of years. With high house prices and rent keeping teenagers and adult kids at home for longer, parents are looking at different ways to help them achieve some level of independence while saving for a home loan. 
They also appeal a great deal to those who own investment properties, as granny flats are relatively cheap to construct and can increase the rental yield to nearly 10 per cent. This extra income from rent can also help out those wanting help to pay off their mortgage, as the weekly rent obtained from these dwellings can be enough to cover the repayments.
Some have even gone as far as saying that granny flats will solve the housing shortage problem in already crowded metropolitan and suburban areas. However, there are mixed opinions about the value granny flats add to a property, with some claiming they actually make a property harder to sell as there is a limited pool of buyers willing to fork out extra for a property with a granny flat. 
Before you make a decision, it’s important to weigh up the cashflow benefits as well as resale impacts. And depending on your situation, it could be a better option to invest your money in another property instead.
What they’re good for
Granny flats could be said to ‘grow with you’ as they have myriad uses. Some of these include:
Home offices
Save money on renting an expensive commercial space by building your own office right at home. You will also save on travel costs to and from work and eating out, spend less time travelling places and get a better life/work balance.
Housing elderly parents 
You don’t want to put them in a home, but they need to be looked after without losing their independence. A granny flat is a great residence for elderly parents. 
Lodging for young married couples 
Young couples trying to save for their own home need somewhere cheap to rent in the meantime; parents sometimes build them a granny flat out the back to provide a solution to their problem. 
Rental income
Rent out the granny flat to make some extra money, or even downsize and move into the granny flat yourself and rent out the house to make even more. As an investment, a granny flat is neutrally or positively geared even before any tax benefits.
Hobby space
Is sewing, art, crafts or woodwork one of your hobbies? A granny flat is a perfect space to carry out these passions without interfering with any house space.
Adding more bedrooms 
Add another bedroom or two for less cost than renovating the house. This then creates a separate space for your adult or teenage kids. You could then rent the space out once they grow up and move out.
Financing granny flats 
When it comes to financing your new granny flat, you should speak with your lender. Generally, you can use the current equity available on the property, which will merely add an amount onto your current mortgage. Obviously you will need to have the existing property valued.