The Finance Algorithm

Granny Flat ROI Calculator

Calculate the return on investment from building a granny flat. See construction costs, rental income, and how long until it pays for itself.

Updated October 2026Built and checked by MaverickHow it's calculatedReport an error

Your numbers

Updates as you type
$
$150k

Total cost including construction, council, and connections

$
$400

Weekly rent for the granny flat

$
$900k

Current market value of your main house (before granny flat)

$

An agent's or valuer's appraisal of the whole property once the flat is built. Leave at 0 if you don't have one.

$

Your estimate of insurance, the extra council rates and water, maintenance and any property management fee

Primary reason for building the granny flat

Financing method affects your net return

%

Your lender's rate. Defaults to the RBA's average variable home loan rate, 6.8%. Ignored if you pay cash.

The button asks our AI to explain these figures in words.

Granny flat ROI

Rental yield

11.33%

net annual on build cost

Net annual cash flow

$6,800

after financing costs

Value added

Not appraised

from your appraisal

Payback

22.1 years

years to recoup build cost

Net return on the build cost

Set against a 1-year term deposit (RBA) and, if you borrow, the interest rate on the loan.

11.3%Granny flat (net)5.0%1-year term deposit6.8%Finance rate

Net cash position by year

Starts at minus the build cost and crosses zero when the yearly cash flow has covered it, before tax.

$0-$20,500-$41,000-$61,500-$82,000Y0Y2Y4Y6Y8Y10
11.3% net yield on the build cost
Rent of $20,000 a year less $3,000 of running costs leaves $17,000, and $10,200 of interest at 6.8% leaves $6,800, before tax. At that rate the build cost is covered in about 22.1 years. Add an appraisal of the property with the flat to see the value it adds.

How it works

A granny flat - a secondary dwelling on the same lot as your home - can bring in rent or house family. This calculator works out the rent after vacancies, your running costs and the interest on the money borrowed to build it, the net return on the build cost, how long it takes to cover that cost, and, if you have an appraisal, the value it adds to the property. Build costs, rents and approval rules vary widely, so it runs on your quotes and estimates.

  1. 1Enter the total build cost from your quotes, including approvals, site works and service connections.
  2. 2Set the expected weekly rent and how many weeks a year it may sit empty.
  3. 3Add your main property's value, and an appraisal with the flat if you have one.
  4. 4Enter your yearly running costs.
  5. 5Choose the purpose, how you'll pay for it and the interest rate if borrowing.

The figures today

The average new owner-occupier home loan was $842,000 in NSW and $664,000 in Victoria in the June quarter 2026, from the ABS. A two-bedroom unit on a new lease in NSW rents for a typical $785 a week.

House prices and loan sizesRents by postcode

Worked examples

2-Bed Granny Flat, Rented Out

Build cost $160,000 from quotes. Rent $450 a week with 2 weeks vacant. $3,000 a year of running costs. Financed from home equity at 6.2%.

Estimated build cost
$160,000
Expected weekly rent
$450
Main property current value
$850,000
Running costs a year
$3,000
Weeks vacant a year
2
Purpose
Rental income
How will you finance it?
Home equity / redraw
Interest rate on the borrowed money
6.2%

Rent of $22,500 a year less $3,000 of costs leaves $19,500, a 12.2% net return on the build cost. Interest of $9,920 a year leaves $9,580 before tax, so the build cost is covered in about 16.7 years. An appraisal with the flat would show what it adds to the property.

Questions people ask

How much does a granny flat cost to build?
It depends on size, site and finish, and on approval, site works and connecting water, sewer, power and stormwater, which add to the build price. Get full quotes that include all of these rather than relying on a headline price.
Can I build a granny flat on my property?
It depends on your state, zoning, lot size and council. In NSW, a detached granny flat of up to 60 square metres on a lot of at least 450 square metres in a residential zone can be approved as complying development if it meets the standards; otherwise it needs a development application. Check with your council or a certifier first.

The terms, in plain English

Granny Flat / Secondary Dwelling
A self-contained dwelling built on the same lot as an existing house, usually one or two bedrooms. In NSW, complying development allows up to 60 square metres.
Complying Development Certificate (CDC)
A faster approval route in NSW for development that meets set standards, issued by a council or registered certifier instead of a development application.

Official sources

Rental Yield Calculator

Calculate the combined yield of your property with a granny flat.

Renovation ROI Calculator

Compare granny flat ROI to other renovation options.

Depreciation Schedule Estimator

Claim depreciation on your granny flat build.