Granny Flat vs Apartment – Which to invest in
It’s the five hundred thousand dollar question many investors are asking themselves now. Should I build a granny flat in Sydney, or by an apartment?
You may have saved some money or found some equity that’ll cover a deposit on a humble western Sydney home, or a brand new 2-bedroom apartment. Or you may already own a property and are thinking if you should build that granny flat in Sydney or put the funds towards one of those new apartment buildings in your area.
The question still lurks – granny flat or apartment, which to invest in?
Here we’ll look at the pros and cons of each and how they impact different investors.
This is not to be taken as financial or investment advice. You should always consult your financial adviser for investment advice and not rely on the information provided in this article as each person’s circumstances varies.
| Investment Consideration | Granny Flat | Apartment |
|---|---|---|
| Return on investment | A high rental return on investment is achievable for a minimal investment amount in the order of $100k. Over all higher ROI%. | A similar rental return on investment is achieved for substantial investment in the order of $600k. Over all lower ROI%. |
| Capital appreciation | Capital appreciation exists on the land so the property will provide a capital gain. | Apartments do provide a capital gain; however, gain is linked to supply and demand, low (or even negative) short-term gains could be anticipated in certain areas with a large supply of apartments. |
| Demand | Granny flats suit a range of tenants, especially those that apartments can not service. Potential tenants include: low income owners, pet owners, elderly, people with children. | Apartments appeal to the professionals that are looking for convenience, proximity to train stations, low maintenance living. |
| Tax benefits | In most cases, granny flats provide a positive return on investment. A granny flat can also provide some depreciation benefits. | Apartments in most cases provide a negative return on investment. Apartments can provide some depreciation benefits. |
