Are Granny Flats a Good Idea?

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A granny flat, for many families, is the solution to independent accommodation for older family members or teenagers.

Granny flats are also called DPUs – Dependent Person’s Units – because in many cases they are built to house elderly relatives who still wish to have a degree of independence.

A granny flat is a second dwelling on your property that is separate from your main house.

How is a granny flat different to a dual occupancy or a duplex?

Dual Occupancy

A dual occupancy is a complete home, either attached or detached.

An attached dual occupancy is two dwellings attached to one another on one parcel of land. A detached dual occupancy is two separate dwellings on one lot of land.

Both are considered complete homes.

A dual occupancy can have separate leases and utility accounts.


A duplex in legal terms is two separate dwellings with separate titles. Both dwellings share street frontage and an adjoining wall. They can exist either on one land title (owned and sold together) or on separate titles (individually owned and sold).

Granny Flats

A granny flat is defined as a self-contained dwelling – either attached or detached from the main dwelling – is and part of the same title. A granny flat usually contains one bedroom, a kitchenette, a living area and a bathroom. A granny flat is considered a second dwelling, which is what chiefly separates granny flats from dual occupancy properties and duplexes.

 Rules About Granny Flats in Victoria

Under Victorian law, only one person can live in a granny flat at any one time. That person must be dependent on the person/s in the main home – this can be for economic, social or medical reasons.

  • A granny flat or DPU must be located on a block at least 450 square metres in size and the entire granny flat must be no greater than 60 square metres.
  • The main dwelling must have off-street parking and only the primary and secondary dwelling are to exist on the block of land.
  • Once a granny flat is built, subdivision is nor permitted.
  • A granny flat must have its own entrance
  • It must be self-contained with its own toilet, bath or shower, kitchen and living area, and have its own sewerage and water services shared with the primary dwelling.
  • It must be moveable or easily removable
  • A granny flat must be removed as soon as the dependent ceases living there

Check your local council guidelines for any further restrictions on granny flat size, privacy requirements and other guidelines.

Can a granny flat be rented out?

Under current Victorian law, a granny flat cannot be rented to someone outside your family. This can make things tricky if you are selling your home with a granny flat attached- it may appeal to fewer potential buyers than a property with two separately titled dwellings on the same piece of land.

What to Consider Before You Start Building a Granny Flat

Building Costs

The cost of a granny flat will depend on the type and size of structure you build – something built from scratch by a builder will be more expensive than a pre-fab design – though keep in mind that a granny flat kit can have a lot of add-on expenses.

You will also need to factor in council fees, connection of utilities and any special design features such as wheelchair access or other mobility considerations.

On average, a one-bedroom granny flat will cost between $80,000 and $120,000. The total cost will depend on the materials and height of the dwelling, any extra plumbing required, the area built on, and any extra landscaping or accessibility features.

Financial Implications

If you are receiving rent from a family member living in your granny flat, this income needs to be declared on your tax return.

It’s a good idea to engage a quantity surveyor to prepare a tax depreciation schedule when your granny flat is first constructed, in order to maximise your tax benefits as the owner of the investment property.

The Home Inspection Hub carries out tax depreciation schedules with the assistance of a qualified quantity surveyor.

If you sell your home, part of the sale price will be subject to capital gains tax. We recommend seeking independent advice from a qualified tax accountant.

Find out more about the rules and regulations around granny flats in Victoria before you take any steps towards building.

If you are planning to build a granny flat, are selling your property with a granny flat or are thinking of buying a property with a granny flat, the Home Inspection Hub can help.

We carry out a range of professional residential building inspections throughout Melbourne, Geelong and Central Victoria:

  • Owner builder defects (137b) reports
  • Pre-purchase house inspections
  • Pest inspections with licensed and registered pest inspection company Crunch Pest Control
  • New home construction inspections
  • Renovation inspections
  • Special purpose inspections
  • Pre-sale/vendor reports

Our team of inspectors comprise building industry professionals with decades of experience.

To get the ball rolling, call our office on 1300 071 283, email or ask us for a free quote today.