Key takeaway: Investors are turning to granny flats to add rental income now that negative gearing does less of the heavy lifting. Oliver Jackson, Director of Living Property, says his granny flats cost $220,000 to $320,000 to build and rent for about $450 to $600 a week, roughly a 10% yield, enough to lift a property out of negative cash flow.
In this episode of Geared for Growth, Mike Mortlock is joined by Oliver Jackson, Director of Living Property, to unpack what investors should be thinking about in a rapidly changing property market.
With borrowing capacity tightening, tax rules changing and cash flow becoming increasingly important, Oliver shares how he and his team are adapting their property strategies, and why granny flats are becoming an increasingly attractive option for investors looking to improve cash flow while still targeting long-term growth.
Oliver also shares his perspective on where the market is holding up, why the more affordable end of the market is proving resilient, and the importance of having a strategy that matches your individual goals and ability to hold.
Oliver’s key message is simple: the rules will continue to change, but investors still need to make decisions based on the fundamentals. Work out what you can afford, understand the numbers, build a strategy and make sure the property works for you.
This episode is a practical look at how investors can adapt rather than sit on the sidelines waiting for certainty in an uncertain market.
Oliver’s granny flats are built on site and cost between $220,000 and $320,000 depending on the package, with each package the same size but different specifications. He says to allow $15,000 to $25,000 for council fees, drawings, soil testing and approvals, so the cheapest comes to about $250,000 all in. Cheaper granny flats and tiny homes are widely available, but he describes his as premium.
Oliver thinks so. He says a granny flat he is building in Melbourne should rent for about $600 a week, and ones in areas like Bendigo or Geelong $450 to $500, a yield of around 10%. In his example, a $600,000 house renting at $500 a week plus a $250,000 granny flat renting at $500 gives about $1,000 a week on $850,000. Compared with building a second house, he says granny flats are faster and cheaper.
Not currently. As Mike Mortlock explains, the government has confirmed granny flats are not treated as new residential premises, so losses are carried forward rather than offset against taxable income each year. Oliver says this makes no sense to him, because a granny flat that can be rented separately is another home for people to live in. He suspects it is because it sits on the same title. You still get the deductions, just carried forward.
Start with what the local council allows. Oliver says some Brisbane councils allow 80 square metres and others only 45, while Victoria and most of Adelaide cap granny flats at 60 square metres. He mostly builds two bed, one bath designs because of rental demand. Then build a strategy around what you can borrow and hold. He says if you can’t afford around $200 a week negative, property may not be for you.
This is general information from the podcast, not financial advice.
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