Previously known as “The Property Planner, Buyer and Professor”
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Show Notes – Granny Flats
In this episode the Property Trio unpack a fantastic listener question from Jade about whether building a $250,000 granny flat for multi-generational living is a smart value-add or just an expensive lifestyle decision.
Lifestyle Over Capital Growth
Granny flats can be brilliant for families, providing affordable housing for parents, in-laws, or adult kids
But they rarely deliver strong capital growth.
Backyards & Resale Appeal
Most mainstream buyers in Melbourne prefer a bigger backyard over a second dwelling and in some cases, a granny flat can even detract from resale appeal.
The Trio highlight that this decision must ultimately come down to family priorities rather than assumptions about adding financial value.
Costs, Yields & Depreciation
While Sydney has seen investors boost yields with granny flats, Melbourne’s stricter planning rules make this harder.
With build costs often ranging from $150,000 to $300,000, the risk of overcapitalisation is very real.
For family use, there’s no rental income to offset expenses, and lenders generally don’t assign much extra value unless the flat is fully approved and rentable.
There can be depreciation benefits, but only if income is being generated.
The Crucial Difference: Regulations
Victoria’s new planning changes create a vital distinction between:
- Small Second Homes: up to 60m², rentable, and no planning permit required in most cases.
- Dependent Person’s Units: for family use only, often requiring removal when no longer occupied.
Choosing the wrong type could trigger compliance headaches, fines, or even council orders.
The Verdict: Family First, Investment Second
Granny flats can be fantastic for family needs: affordable, practical, and supportive of multi-generational living.
But from an investment perspective, they’re rarely a capital growth driver.
Gold Nuggets
Cate Bakos’s gold nugget: The mainstream market preferences must be considered when weighing up overcapitalisation threats.
Mike Mortlock’s gold nugget: Mike considers the cost-benefit proposition of a granny flat build. His live modelling suggests a payback period of 16 years; a significant amount of time.
David Johnston’s gold nugget: “Go and talk to anyone you know who has built a granny flat, and find out mroe about their experience, return on investment, and their overall outcome.”
Resources:
- Ep #11: Small time development – How it can work for you, but is it a risk worth taking?
- Ep #16: Unpacking land to asset ratio
- Ep #60: Why established properties outperform
- Ep #230: Equity Unleashed: Property Planning & Borrowing for Renovations & Wealth Creation
- Ep #243: Building Long-Term Wealth: Mastering Land to Asset Ratio & Paying Down Your Home Loan Vs Investing Surplus Cash Flow
