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What is a Granny Flat? The Pros and Cons


“Granny flat” is a term that you may have heard your friends talk about when discussing an addition to their existing home to accommodate an elderly family member or something they’re considering as an investment to rent out.

But what is a granny flat? Is it something that you could benefit from? Do you have a family member who may need additional supportive housing for which a ‘granny flat’ could be used?

What is a Granny Flat?

The granny flat definition is an additional structure that shares a property with an existing family home. These flats are typically able to accommodate one or two people. Granny flats in Australia are becoming increasingly common on many properties with enough land to accommodate a granny flat’s size, typically between 300 and 800 square feet.

Evolution of Granny Flats

Before you ask: “Can I put a granny flat on my property?” Let’s first explore where the granny flat came from and how it has evolved with time. 

Granny flats in Australia began with the Victorian concept of ‘dowager homes’, where the widow of a property owner would be allowed to stay after the property was sold to another individual. Over time, the granny flat devolved from the lavish luxury of the dowager home to simpler dwellings and became fully detached from the main building on the property. 

While all granny flats built today must conform to the national building code, granny flat rules vary by state regarding sizing and whether or not they must share a common driveway and be hooked up to the same utility lines. 

Pros of Building a Granny Flat

Beyond allowing family members to live in your granny flat, there are many other positives to building a granny flat. 

Rental Income 

Even if you don’t have family, you can move into your granny flat. Some states have granny flat rules that allow you to rent out your granny flat as an apartment to people in need of housing (who aren’t family members). This helps reduce urban sprawl in the city, as well as providing you with potential rental income. 

Increased Property Value 

Building a granny flat could add up to 30% on top of your current property value, depending on its size and build quality. With an average size of between 300 and 800 square metres, having an additional home on your property adds significant value to future owners. 

Additional On-Site Structure for Future-Proofing 

If you can see yourself aging in place, building a granny flat is a fantastic opportunity to future-proof your property and provide you with a beautiful home, typically on one-level, that you can move into when you’re ready to leave your larger home. You could then rent out or sell that home for additional income for your retirement. 

Use as an Additional Office Space 

If you have needs that supersede an at-home office space, building a granny flat on your property is a great way to add office space that you can design to suit your needs. For example, a sound engineer or musician could use a granny flat as a recording studio.

Cons of Building a Granny Flat

Despite their utility as a rental opportunity, future-proof building or additional space for your working needs, there are a few cons to building a granny flat.

Granny Flat Builds Aren’t Cheap

While granny flat builds offer income opportunities, the cost of building and maintaining with all of the necessary utilities isn’t cheap. A Sydney-based estimate is between $50,000 to over $120,000, not including the cost of utilities.

They’re an Additional Insurance Cost

Not all homeowners’ insurance policies will cover an additional dwelling like a granny flat. This is because homeowners’ insurance was designed to cover the cost of building a single dwelling on a lot. As such, they may not be covered under your existing policy. This will mean an additional insurance policy, which could be over $1000/month. 

Zoning Regulations & Red Tape 

You may discover that you run into additional red tape and different zoning regulations if you try to build a granny flat. Before you start building a granny flat, check your local zoning regulations concerning putting an existing structure on your lot.

Capital Gains Taxes 

If renting out your granny flat, you may have to pay additional property and capital gains taxes on your rental income. However, some granny flat arrangements are exempt from capital gains taxes, specifically arrangements that grant a person the right to occupy the space for life.

Frequently Asked Questions

We get a lot of questions about our granny flat builds. Here are a few FAQs and their answers!

What Makes it a Granny Flat? 

The granny flat definition is a home built on an existing property, as well as the main dwelling, that has its own entrance, kitchen, living room and bathroom. Sometimes, granny flat rules in your state or council could have granny flat size restrictions that determine whether or not a dwelling qualifies as a “granny flat.”

What Are The Different Types of Granny Flats? 

There are many ways to design your granny flat. However, these are three of the most common types of granny flats. 

Attached Accessory Dwelling Units: These granny flat options always include an exterior door to separate egress from the main dwelling but are often a basement or lower-level suite with a kitchen, bathroom and living area.

Detached Dwelling Unit: The detached dwelling unit is most often a freestanding structure within the boundaries of your property that is hooked up to your existing water, sewer, and electricity. However, it has its entrance and possibly a wrap-around driveway for the vehicles of the occupants. A detached dwelling unit provides extra privacy for the occupants. It’s also a perfect option for a rental unit to non-family members.
Garage Conversion: The simplest granny flat option most homeowners choose for short-term stays of elderly family members is a garage conversion. Garages typically have enough size to meet granny flat requirements and can be easily outfitted with an open-concept design and smaller bathrooms and bedrooms.

Final Thoughts 

If you’ve been searching for an opportunity to make some extra money with your additional property space, or a way to help an elderly family member who needs an accessible space to stay, or are trying to find a way to future-proof your property for your own needs as you get older, granny flats are a fantastic opportunity. 


At Provincial Homes, we specialise in property builds with granny flat incorporations! Get in touch to find out if a granny flat is a possibility on your property.