Adding value with a granny flat

by Ewald Biesenbach

Adding value with a granny flat

Knowing the local rules A good way to start is to understand what local regulations entail – what’s allowed and what’s not. You may find that the definition of second dwelling is not as straightforward as you thought.

In a nutshell, ‘granny flats’ must comply with the Building Code of New Zealand as well as local rules and regulations, which vary from city to city, and even council by council. If you’re not sure where to start from, Building.govt.nz is the go-to resource for all-things building-related.

Rates and fees can vary When it comes to rates and additional fees, as this recent story shows, knowing the rules becomes particularly crucial. Here are some examples:

In Christchurch, rates are charged for each self-contained part of a property (used or inhabited), if it has a fully-functioning kitchen. In Auckland, homes with a granny flat pay two uniform annual general charges and an additional percentage of the general rate. In Wellington, rates are determined based on capital venue rather than the number of dwellings. However, when the second dwelling is used in an Airbnb-type of situation, a commercial rate may be charged. Some districts (like Thames-Coromandel) incentivise older residents to downsize by lowering fees on well-designed, certified smaller homes. Who will use your ‘granny flat’, and what for? Now that you’ve worked out what you can build, it’s time to think about its purpose. Will it be a ‘man cave’, a closed-off guest bedroom or a quiet home office space? Or perhaps you’re looking to create a self-contained unit and rent it out?

Identifying who will use your ‘granny flat’ (and what for) will help you include the right features – like extra storage, a bathroom or a kitchen, or bigger windows for even more light and ventilation.

How big? In most councils, you might not need permits if your second dwelling is smaller than 10 square metres. Generally speaking, a ‘granny flat’ can be up to 65 square metres (but once again, rules may differ widely).

Attached or detached? Your ‘granny flat’ can either be a stand-alone dwelling or an extension of your house (e.g. if you convert your garage or your basement).

Building costs will vary: while renovating within the boundaries of your home may be cheaper, a stand-alone dwelling offers greater flexibility in design and usage, and could be more affordable to run in the long-term. Whatever you choose, focus on return-on-investment.

Understanding your obligations If you’d like to turn your ‘granny flat’ into an extra income stream, you can either rent it out or join a holiday rentals site (like Airbnb).

In the former case, bear in mind that – even if you’re renting to a friend or acquaintance – you’ll still need to comply with the Tenancy Act. In the latter, you’ll officially be part of the tourism and hospitality business, so be prepared to offer your guests a hotel-like experience.

New build or pre-fab? Thanks to innovative materials and trendy designs, pre-fabs can be a cost-effective option, and there are plenty of providers to choose from. For example, if you’re looking for a tiny studio or home office, MyPod is just the latest kid on the block.

For bigger and more sophisticated designs, you can opt for a tiny house: here are some tips to help you choose the right one.

Will it pay off? As we said, a well-designed granny flat can add beauty and value to your property. How much value, you may wonder? Of course, there’s not one answer to this question. But in the current market conditions, a property with the option to spread the costs by taking on tenants will likely appeal to buyers.

Once again, keep building goals and costs top-of-mind. How much can you expect to charge for rent? Will it help cover costs in a reasonable period of time? Is your project good value for money?

Source: Houzz

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