How much does it cost to add a granny flat to your property?

Installing a granny flat on your property is one option for homeowners to provide additional space for family and friends while potentially boosting their property value. But just how expensive and extensive is the process of adding a granny flat?

Average cost of adding a granny flat

Source: Domain.com.au

The cost of adding a granny flat can typically range between $20,000 and $120,000, depending on the scope of the work involved. Smaller, DIY installations can keep your budget under $50,000. However, one- or two-bedroom builds can climb into the six-figure range.

For those looking for a bargain with a kit home, it’s worth doing your research and asking for a list of full costs. Backyard Grannys warns homeowners that these companies may not advertise additional costs, such as:

• Site costs
• Service connection
• Electrical and plumbing essentials
• Council or complying development approvals
• Inclusions such as blinds, floor finishes, letter boxes and everything you’d need to move in.

When you consider the cost of construction and engineering, as well as sourcing building materials like timber, adding a granny flat can be a more expensive project than, say, a laundry renovation.

However, it may also give your property value a boost if done property. In an interview with Domain, Raine & Horne chief executive, Angus Raine, noted that properties with a granny flat attached can sell for a “significant premium”.

“As long as it’s in keeping with the existing property, doesn’t look as if it’s been whacked on and doesn’t encroach too much on a garden, it can add value,” says Mr Raine.

“That’s particularly in an area with a lot of students who might want to rent it, or where several generations live under the one roof, or people work from home. When it comes time to sell, it can stand out from the competition.”

But if the main house is in need of upgrades, if the granny flat reduces the outdoor space too much, or overlooks the main home, you may be better off considering putting funds into renovating the main home, according to Mr Raine.

How to finance your granny flat construction

• Home equity

A home equity loan may be one option worth considering to finance your granny flat build. Lenders will calculate the difference in the remaining balance of your home loan against the value of your property to calculate your available equity. Generally, lenders may allow you to borrow up to 80% of this total value.

• Offset account or redraw facility

You could also consider dipping into any funds you’ve been depositing into your offset account or redraw facility over the years, if this is available to you. Home renovations are one of the most popular reasons for accessing any funds in these home loan features. Keep in mind that some lenders may cap the amount you can withdraw from your redraw facility or offset account.

• Renovation personal loan

You could also consider if taking out a personal loan is a better fit for your goals, especially if you don’t want to dip into your nest egg or home equity. Renovation personal loans may help provide most or all of the funds needed for your granny flat installation, depending on your financial situation and credit score.

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