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Granny Flat vs. Dual Occupancy – Find Out What You Should Do.

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  • Granny Flat vs. Dual Occupancy – Find Out What You Should Do.

If you are looking to build on your existing property, there can be a lot of confusion surrounding the topic of granny flats vs. dual occupancy – so what is the difference?

 

The main difference between a granny flat vs dual occupancy is the ownership – a granny flat is simply a secondary dwelling, but it must be owned by the same person who owns the main house. Whereas in a dual occupancy, there can be a different owner for each residence, and they can stay on the same land title if you don’t intend to sell.

 

When deciding between a granny flat or a dual occupancy, there are a lot of factors to think about, as what is the right choice for one household may be incorrect for another.

 

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Today I will discuss the advantages and disadvantages of both, to help in making a decision that is right for you.

 

Granny Flat vs Duplex

 

A granny flat (a “secondary dwelling”) is a self-contained dwelling within the grounds of the main house.

 

Although it may be a freestanding unit, detached from the main house, the granny flat is not considered a stand-alone property and cannot be sold to another owner – this being the main difference between a granny flat and a dual occupancy (a “duplex”).

 

The benefits of a granny flat are:

 

  • Lifestyle benefits – A granny flat offers many lifestyle benefits for the homeowner – it can be used as a study, a place for visitors or to house family, or even a place for your teenager to just hangout.

 

The disadvantages of a granny flat are:

 

  • Granny flats have strict regulations in regards to their size – In comparison to duplexes, granny flats have far more strict regulations on size – they differ between states and councils, but you generally cannot gain permission to build a granny flat larger than 2 storey’s or 60 to 80 square metres.

 

  • They can only be used as an investment property in some states – In some states a granny flat can be rented out to members of the public, but some states such as Victoria have restrictions on who lives in granny flats, and who can rent them.For example, regulations in such council areas are so strict that granny flats can only be occupied by a person who is dependent on the resident of the main dwelling (usually a member of the family), but once they leave it has to be removed, and some council rules state that granny flats cannot be rented out privately.

 

In areas with such strict granny flat laws such as Victoria where they cannot be used as an investment property, a duplex is often preferred for investors.

 

The benefits of a duplex are:

 

  • They can be easily rented to external tenants –  Unlike granny flats, where in some states the local council’s regulations refuses renting out your granny flat to anyone other than a member of your immediate family, if you build a duplex you can live in one half and rent out the other, and generally speaking they would gain more rent than a granny flat in the same area.

 

  • You can make significant capital gains tax by building a duplex – Splitting one block of land into two, that can be lived in and sold separately, can add a lot of value to your property, whereas a granny flat is not always seen as adding the same financial value.

 

  • The regulations regarding their size are far less strict – For example, in some areas in NSW, the block size required for a duplex is only 400 square metres – less than that required for a granny flat which is 450 square metres.

 

However, the rules do vary between states and from council to council, so I highly recommend you check with yours.

 

The disadvantages of a duplex are;

 

  • It can be harder to get approval for dual occupancy – In some areas, it can be very hard to gain approval for a dual occupancy, so it may not be the best choice.

 

  • Fees can be much higher – Fees can be as high as $40, 000 in some areas, which may impede a private project.

 

  • They generally cost more to build – Quite often an existing primary residence needs to be demolished to make room for a duplex, which takes more time and money than building a granny flat.

 

Can You Subdivide Your Granny Flat?

 

Short answer – No.

 

Officially, granny flats are secondary dwellings on your primary dwelling, and, once registered as such, must remain as such.

 

This means that once you build a granny flat, you cannot subdivide the land into two separate titles, or ever sell it as a separate property.

 

What Should You Do – Build a Granny Flat or Subdivide?

 

If you plan on handling the secondary dwelling as a completely separate property – not as an extension of your family home – it makes sense to subdivide first and then build.

 

Whether you’re building a full-sized dual occupancy or a granny flat, you can split your Torrens title first (the title of the person recorded on the register as the proprietor (owner) of the land), then build on the new empty lot.

 

This allows you to go about your ‘business as usual’ and may allow you to get around the no-subdividing rules of constructing a granny flat, depending on the size of your block, your local councils regulations, and the type of granny flat you are looking to build – a detached, completely freestanding unit may work best.

 

This may be the ideal choice for you, if you’re planning to manage and eventually sell the new home separately from the primary residence – basically, you’re getting the benefits of both the granny flat and dual occupancy with none of their disadvantages.

 

You could, for example, keep the land and lease, gift, or sell it to somebody else to build on, or use the second property to help a younger relative find their own home in what is a very hard housing market to enter.

 

Whatever decision you choose to make – to build a granny flat, a duplex, or to subdivide and then build whatever your council allows, I can only make the following suggestions:

 

  • Make your plans AFTER you decide what you want to do with your title. As it is a large expense having multiple plans created for multiple “end results”

 

  • If you are looking to house an elderly relative and gain the associated tax deductions, look further into building a granny flat.

 

  • If you want the option to subdivide to sell the homes individually in the future, building a (non-granny flat) secondary dwelling may be your best option.

 

  • If you’re still not sure which option you should choose, you can always talk with a real estate professional such as a conveyancer, lawyer or real estate agent.

 

What is a Better Investment?

 

Both granny flats and a duplex are good investments, for different reasons.

 

Granny flat

 

  • The approval and construction process is generally quick and easy, so, as long as your council allows, you can begin collecting rent in a short period of time – however, while building a granny flat is permitted in Melbourne, Brisbane and Adelaide, regulations limit the occupant to a dependent or family member.

 

  • They cost less to install, generally between $110 000 – $200 000 in total, although far less depending on the finish, the difficulty of your building site, and even if you choose to build it yourself, so the pay-off makes it worthwhile, as depending on your location you can get anywhere from $350-400 rent in a typical city or up to as much as $700 on Sydney’s northern beach-side

 

  • The certification and planning costs associated to building a granny flat are much cheaper. For instance doing figures when thinking about building a duplex myself, I realised that I would be spending in excess of $60,000 before any construction work would begin here on the Central Coast, NSW

These expenses included:

  1. Planning (architects) charge much more for a duplex than a simple Granny flat design
  2. Council contributions were huge compared to a Granny flat
  3. I would have been forced to create a new footpath, driveway and further landscaping by council.

 

Unfortunately, There are many more “hurdles” to jump through, with more forms to pay when submitting to council

 

 

Duplexes

 

  • A duplex has more flexibility, because each residence can be sold separately, and so even before you begin construction you are creating equity by subdividing the land.

 

  • Disadvantages to building a duplex is the time and cost – development applications, council costs, subdivision and strata titling can cost up to $60 000 and take up to 6 months for council approvals, which is a long wait with a vacant lot that can’t be rented.

 

  • The return you get for your investment can be huge, however – they are considered to be a safe investment because you are creating two residential incomes (unless you choose to live in one property), usually each in between 6-7% in return, as well as an instant equity after subdividing.

 

  • It is also worth mentioning that there are tax implications with duplexes, that you need to speak with an accountant about. For instance the second property you decide to rent or sell, won’t be governed by “owner-occupied” rules for primary residences.

 

Can You Build a Duplex With a Granny Flat On It?

 

As duplexes and granny flats are both considered dual occupancy, you can only have one or the other – essentially, a granny flat is a type of secondary dwelling, and you cannot put a secondary dwelling on an allotment of land that already has more than one dwelling on it.

 

As the land has already been subdivided, you would need to check your local councils maximum land size – but generally speaking it would not permit this.

 

Conclusion

 

There are both advantages and disadvantages to building a duplex which is two properties, usually side-by-side, which share one dividing wall, and a granny flat, which is smaller house on your primary residence.

 

Take into consideration exactly what you want from your investment before deciding what to build.