In recent years, investors have been looking at different strategies to try and maximise the returns they're receiving on their rental properties.
One clever strategy has been to either purchase a property that has a granny flat on it, or build a new one, with the intention of renting it out, adding another revenue stream. The extra income can help turn a negatively geared property into one that's positively geared, or it could be a great way to help pay off your PPOR (principal place of residence) even faster.
While the increased cash flow is great, it's important to prepare your granny flat in the right way in order to attract tenants and boost your rental income.
Appeal to the renters
When considering renting out a granny flat, it's important to understand what part of the rental pool it is going to appeal to. For the most part, a granny flat is likely competing with other types of rental accomodation such as studio apartments or share houses.
That means, it's normally going to be singles, students, or young couples who are looking for cost-effective options. You will therefore want to appeal to these types of people, by having everything set up and ready to go.
Basics like air conditioning and a dishwasher will make a huge difference in what is going to likely be a smaller space, and it will also set you apart from other properties such as share houses, which may not have the same level of features.
You can also look at adding extras to entice renters, such as access to other areas of the property, such as a pool if there is one, or offering parking if the property has additional space for multiple cars.
On top of that, just having a clean and modern interior, such as a new or a looked-after kitchen or kitchenette can make a big difference. Older granny flats can often be neglected or used for storage. Before renting it out, a fresh coat of paint, new window coverings and some carpets or floorboards would go a very long way to appealing to renters.
Another approach to preparing a granny flat is to take things one step further and make the experience completely self contained.
You could go as far as offering a furnished or semi-furnished property, with things like a bed and a fridge. It would be very easy to add on features like free wifi, or even make bills (power and water) inclusive and charge a higher rate of rent.
This will appeal to people like students who might only be there for a set amount of time each year, or people looking for short-term accomodation. The downside would be that while it might be easier to attract tenants, they might not be there long term, which means you might need to continually be on the lookout for tenants.
Managing the Property
These days, it's a good idea to work with a property manager, not just for the convenience of having them take care of the day-to-day issues with the property and to find tenants, but to also manage it from a legal perspective.
Renting out granny flat is not uncommon, but it doesn't occur in every location as laws around granny flat are different in each state. Speak to a property manager before you start going down the granny flat route and make sure it's possible, firstly, and also practical.
They will also be able to handle all the issues that come with screening tenants, collecting rent, and handling problems on your behalf.
Renting out a granny flat can be a great way to boost a property's income and in many cases, the cost to build one can be recovered by rent far quicker than a traditional house. However, it's important to look at your numbers and ensure that what you're building or buying will appeal to the people that want to live in the area.