Granny Flats are now one of the strongest investment options in the marketplace today.
Gone are the days where a granny flat was considered as a makeshift retirement home for the elderly. Today’s granny flats are modern, attractive, in very high demand and an Outstanding Investment Tool.
GRANNY FLATS RETURN BETWEEN 17-23% P.A. – MAKE AT LEAST $1700 PER MONTH ON $120,000 INVESTMENT!
The affordable housing situation in NSW (particularly Sydney) has lead to the creation of the Affordable Rental Housing State Environmental Planning Policy (AHSEPP). This has created great opportunity for investors and owner occupiers alike who are now earning in excess of 17% on their granny flat investment and over $1700 per month in income.
| Granny Flat Investment | $120,000 | $120,000 | $120,000 | $120,000 |
|---|---|---|---|---|
| Rental Return per week (rental income depends on the area) | $400 | $450 | $500 | $550 |
| Rental Return per month | $1,733 | $1,950 | $2,167 | $2,383 |
| Rental Return P.A | $20,800 | $23,400 | $26,000 | $28,600 |
| Return on Investment | 17.33% | 19.5% | 21.67% | 23.83% |
HOW A GRANNY FLAT CAN SAVE YOU $230,000 IN INTEREST AND CUT 16 YEARS OFF YOUR LOAN!
Whether an owner occupier or investor, home ownership is usually paired with a loan. Loans mean risk! The longer the loan, the more exposure to risk.
The key is to reduce the duration of the loan. By doing this, you save hundreds of thousands of dollars in interest.
Here are two typical scenarios where the addition of a granny flat can help reduce your loan duration.
| Loan Amounts | $ 500,000 | $700,000 | ||
|---|---|---|---|---|
| Granny Flat rental income used as additional loan repayment per week | $400 | $500 | $400 | $500 |
| Years Saved on Your Loan | 16 | 18 | 14 | 16 |
| Interest Saved on Your Loan | $ 229,000 | $ 248,000 | $ 278,000 | $ 306,000 |
A GRANNY FLAT CAN PROTECT YOUR PROPERTY FROM INTEREST RATE RISES
Interest rates in Australia have been very stable over the last few years, but it’s only a matter of time before we see an increase.
Have you ever thought about the additional cost to your loans if interest rates increase?
The good news is that the addition of a granny flat to any property will help buffer your loan by 2-3%…. almost like an insurance policy.
Here are two scenarios assuming $500,000 and $700,000 loan amounts:
| Loan Amount | $ 500,000 | $ 700,000 |
|---|---|---|
| Interest Only at 4% p.a (monthly payment) | $ 1,667 | $ 2,333 |
| Interest rate increases by 2% to 6%. New Interest Only at 6% p.a (monthly payment) | $ 2,500 | $ 3,500 |
| Additional Interest Repayments | $ 833 | $ 1167 |
Now let’s add a granny flat to the property. Here’s how the numbers change:
| Add a Granny Flat at a cost of $ 120,000. New Loan Amount: | $620,000 | $820,000 |
|---|---|---|
| Interest Only at 6% p.a (monthly payment) | $3,100 | $4,100 |
| Additional Interest Now Paid Due to the Addition of a Granny Flat | $1,433 | $1,767 |
Now let’s add the granny flat rental income per month at $420 per week:
| Granny Flat rental income $420 per week | $1820 (per month) | $1820 (per month) |
|---|---|---|
| Surplus Income From Granny Flat Investment | $387 per month | $53 per month |
| Results: The Granny Flat addition has created a safety buffer of 2-3% absorbing an interest rate rise. | In this scenario, your situation went from having to find an additional $833 per month to having a surplus of $387 per month. You now have a granny flat on your property and the rental income is absorbing the interest rate increase. | In this scenario, your situation went from having to find an additional $1167 per month to having a surplus of $53 per month. You now have a granny flat on your property and the rental income is absorbing the interest rate increase. |
DEPRECIATION
For those who need a tax break, the construction of a granny flat adds great depreciation benefits of about $6000 per annum using the Diminishing Value Method. So on top of an additional income, excellent return on investment and protecting your property from an interest rate increase, your granny flat also gives you a huge tax break!
