Do Granny Flats Add Value To a Property?
Do granny flats add value to a property? Investors have been talking about granny flats adding absolutely no capital growth value to a property, and the data shows that this just isn’t the case.
0:00 – Introduction
0:53 – Misconceptions around granny flats adding value
1:28 – We are finding granny flats add value up to the build cost
2:30 – Evidence is there that granny flats do add value
3:26 – Granny flats don’t seem to add instant equity
a big conversation point recently and something that’s come up with a bunch of clients is do granny flat add value to a property if you’re going to be spending 120 130 140 thousand dollars to build a two-bedroom granny flat out the back of the property is that actually going to add any value to the property or does it add no value at all that’s what we’re gonna cover in today’s episode hey i’m ryan from on-property helping you achieve financial freedom and we obviously talked a lot about granny flats in the two properties to financial freedom strategy can be a great way to get an extra income on a property you already own and to get a great positive cash flow as well for the build costs given that we’re seeing rental yields of about twelve thirteen even fourteen percent on these granny flats when compared to the cost of the build but do granny flats add any value so the misconception that I’m seeing with people at the moment is they’re expecting that granny flats add 0 value to your property at all so you’re out laying $120,000 let’s say you purchased a home for $400,000 a 3-bedroom home from 400,000 you then add a granny flat in the backyard for 120,000 people are assuming that okay my total cost or total import is five hundred twenty thousand buy my property is only worth four hundred thousand so they’re expecting that the granny flat and the cost of the build is adding nothing in value to the property but that is not what we’re finding at all and from anecdotal evidence from clients and from people who have built granny flats in Sydney as well as valuations that have been done on granny flats up here in South East Queensland the more common story that we’re seeing is that granny flats tend to add value up to the build costs so for that 400,000 example which is obviously just a hypothetical example if we then add in a granny flat for one hundred and twenty bringing our total cost up to five hundred and twenty thousand what we find is that the valuations the bank valuations will actually come up to that five hundred and twenty thousand as well and then the market obviously responds to that product really well when selling because you’ve got that extra income stream for the property you can sell the property to and in so been the buyer’s agent here from pumped on property recently sold a property with a granny flat and God I think it was over $50,000 more than he expected for the property and sold the property with the granny flat on it so granny parts obviously stay on one title but the evidence really isn’t there to say that granny flats don’t add any value to your property that you’re spending money on this build and you’re getting no value in return so part of the reason we love granny flats so much is that they do offer value up to the build cost so you’re spending one hundred and twenty thousand you effectively adding one hundred and twenty thousand dollars in value or it’s just canceling itself out there and that way any positive cash flow you get on top of that is cream for you and obviously if you can pay that down over time you’ve now got a more valuable asset and you’ve been able to pay it off quicker because you’ve got that extra income from a granny flat so do granny flats add value from the evidence that we can see in the market from sales of Ben’s property as well as clients properties as well as valuations of properties in Sydney that have granny flats and things like that the evidence shows that granny flats do add value what granny flats don’t seem to be good for is manufacturing value or adding instant equity to a property so when we talk about doing renovations we might talk about doing a cosmetic renovation that cost ten thousand dollars but it’s going to add forty thousand dollars to your property a lot of people like this instant equity situation because that then allows you to borrow more money from the bank to go ahead and invest again or it lowers your risk because it lowers your loan-to-value ratio so what we haven’t found with granny flats is that there a way to add instant equity to a property so the valuations don’t tend to come in at more than what the granny flat costs so I guess it’s been a communication error from myself in saying that granny flats don’t really add value they do add value they just don’t tend to add value above and beyond what they cost to build so I hope this clears up that issue I hope this makes it clear for you do granny flats add value to a property yes they generally up to the build cost or sometimes they can be in excess of the build cost when it comes to actually selling the property and so it’s really exciting to see that because obviously it means you’re investing that money into the build but you’re getting that money back effectively in capital growth of your property or your asset now being worth more and then you’ve got the cash flow as well so it’s a really cool strategy something I’m really passionate about and I’m loving seeing people implement and just being a really positive cash flow situation but still being able to invest in metro markets if you’re interested in this strategy where you buy property and build granny flats and we call it the two properties to financial freedom strategy then I do have a free report which outlines this in more detail so you can check that report out at onproperty.com.au/session two properties and I’ll link up to that down below as well what we hear go ahead and check out one of the granny flat walkthroughs that I’ve done so you can see exactly what these granny flats look like how good they are and why they actually add value to a property up to that build cost so go ahead and check that out and until next time stay positive