So you’ve refinanced your home loan and you’re enjoying valuable savings. Now, here’s an innovative way to make that spare cash work harder.
Refinancing your home loan can be a great way to lower your home loan costs, and this can put more money back in your hip pocket. But instead of letting the extra cash slip through your fingers, there’s one option you may not have considered to get more bang from your buck – and that’s by adding a granny flat to your property.
Okay, it may not be for everyone but before dismissing the idea, it’s worth considering the benefits.
Some state governments encourage granny flats
First up, it can be a lot easier to get building approval for a granny flat than for other types of developments. In NSW for instance, the state government’s Affordable Rental Housing Planning Policy provides a range of incentives to encourage home owners and developers to invest and create low cost rental housing.
A granny flat can also be a very budget-friendly option in terms of construction costs with prefabricated dwellings priced below $100,000 – in some cases far less. This makes it an affordable way to use savings from refinancing.
On the flipside, it’s reasonable to expect some sort of return on your investment. Just how much rental income your granny flat will generate depends on a range of factors. This includes your location, the size and quality of the design and the sort of tenant you’re pitching at from retirees through to uni students.
Your local classifieds as well as real estate websites can provide an idea of the sort of rent you can realistically expect to earn.
Add up the benefits and drawbacks
Whether you choose to use a granny flat as a source of extra income or a teenage crash pad, there are pros and cons to weigh up.
On the plus side, the tenant may be available to keep an eye on your home if you take off on vacation though it’s worth aiming to keep the relationship businesslike by establishing firm ground rules on issues like utilities charges or rental bond.
Protect your privacy – and your tenant’s, by planting trees or shrubs to act as screens though be prepared to deal with knocks at the door if the tenant has maintenance requests.
Most importantly, speak with your tax adviser. Our homes are normally exempt from capital gains tax but that’s likely to change if the property is used to produce income.
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