Adding Cash flow to your Property Portfolio

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More cash flow required?

In the basket of add-value strategies available to property owners the dual income granny flat addition continues to show up as one of the best ways we have seen of  quickly increasing cash flow from properties and accelerating the paying down of your mortgages. 

The current market place with its low interest rates makes borrowing a relatively small amount of money required for a granny flat addition much easier.

New state and local council planning regulations now favour increased density of population in most metro areas. This has made it easier and faster to obtain the required permissions to add a granny flat to qualifying residential homes and has also eased the requirements for subdivision of existing house blocks.

It’s quick and easy and a low risk strategy!  Property owners with a property larger than 450 m2 may be able to build a granny flat (otherwise known as a ‘secondary dwelling’) on that block.  Approval for these can be obtained in as little as 10 days.


In the example below we outline how the figures stacked up for one Sydney property owner recently (scenario supplied courtesy of Direct Property Solutions.)

Yes, despite being called “granny flats” you can rent these   dwellings out to anyone, relative or not. They range in size from 29 to 60+ square metres and can be one bedroom, two-bedroom or even four-bedroom with or without verandas.   The associates we work with have recently received approval for an 80m2 granny flat and whilst this is not the norm it certainly demonstrates that when you understand the requirements of the councils you work with creative outcomes can be achieved.

New design options for granny flats can be very upmarket and glamorous – not the tired old fibro shed tucked out the back of the house. As such they add great capital value to your existing property.   In a market where property values are flat or only slowly increasing being able to add to property value in other ways is important. These units can be sleek, beautiful,

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With prices around $90,000 to $120,000 including site costs and approval costs, this type of contemporary living space can transform your property and often push it rapidly into being a positively geared investment for you. It’s common for rental income on a granny flat to match that of rental income from the house on that same block. Wouldn’t that be great for your cash flow position? Below is an example of a granny flat strategy that’s fairly typical in the Sydney market.

North St Mary’s

Purchase Price Property                                    $300,000

Granny Flat Build                                                 $99,900 /Plus GST/Plus Approvals.

Primary Dwelling 3 bed

Secondary Dwelling 2 bed 60 squares           (under CDC AHSEPP with 10 day approval)


Primary Dwelling Rental 1:                                $380 p.w.                              Total Annual Rent:               $34,320 p.a.

Secondary Dwelling Rental 2:                          $280 p.w.


Loans. (An average interest rate has been used)

-interest only loan @ 7%                                    $240,000 or $16,800 p.a.

-interest only Loan @ 7%                                  $ 80,000 or $5,600 p.a.      Total Interest:                        $22,400 p.a.


-property manager @ 5.5%                               $ 1,773 p.a.

-insurance                                                            $   900 p.a.

-council rates                                                        $   600 p.a.

-water/gas                                                            $   600 p.a.

-maintenance                                                       $   500 p.a.                            Total Expenses:                   $ 4,373 p.a.

Depreciation Add back

-tax depreciation over 5 years                        $ 8,000 p.a.

-capital write-off allowance @2.5%                $ 2,000 p.a.                         Total Depreciable Items:    $ 10,000 p.a.

Cash Flow

Gross Rent – Loan = $11,920 – Total Expenses = $7,547 + Depreciation = $17,547 = $337 per week


Some reasons for adding a granny flat to your home or investment property:

  • for a daughter and son-in-law to live in while they save a deposit for their first home
  • as student accommodation if your property is located near a university or Tafe College
  • for a single person to come in as a tenant
  • for your relatives coming to stay short or long term
  • a studio flat for an artist
  • a fully equipped and self contained home office
  • for a small family wanting somewhere to rent while they save deposits for a house
  • for aging parents who want to downsize but not go into a retirement village
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In order to understand what potential your property has for this type of add-value/ add-cash flow strategy you must know and understand the intricacies of council planning regulations that govern each of your properties.   These regulations vary from locality to locality. Charting your way through the plethora of council environmental development plans (current and future), zoning regulations and building requirements can be confusing and time consuming.

If your property is in the Sydney area you can obtain, via Chan & Naylor Finance, a review of your property which will help you assess the potential you may have for adding a granny flat to it. We have arranged for our Chan & Naylor clients to have access to the team at Direct Property Solutions (DPS), who are experts in granny flat additions and renovations. They are willing, at no cost to you, to review your existing Sydney properties at no cost to see what potential they may have. If your property is outside Sydney they can also carry out a review however, generally a fee applies, so ask us to put you in touch with them to discuss options.

If you want to get both capital gain and positive cash flow in the one package, send us an email and we can connect you up with Direct Property Solutions (DPS) for a property review.

Our email at Chan & Naylor Finance is: or you can reach us at

Chan & Naylor Finance on 02 9391 5053.

Jenna Ford 

Finance Strategist & Partner – Chan & Naylor

Disclaimer: The advice and example provided in this article is General Information Only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on any information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.

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