You may be one of the thousands across the country who are considering buying a property with a granny flat.

If so, it could be for a host of purposes, and despite the name, it could be for a reason other than accommodating an elderly parent.

You may have one or more “boomerang children” in tow – adult children who have returned temporarily to enjoy the multiple benefits of living at home.

Or, you may be seeking additional income from renting your granny flat or need an office for your home business.

Whatever your reason, the advantages of owning a property with a second living space on the same block of land are obvious and many.

So it is no surprise that in Sydney alone, building approvals for granny flats have almost tripled on a yearly basis since 2010.

Granny flats can either be attached or unattached to the main residence, but in all cases, smaller. They are often self-contained with kitchen, bathroom and living areas.

Any bigger than 60 square metres and they cease to be a granny flat, and are then classified as another primary dwelling.

Buyers need to be aware that when it comes to granny flats (or secondary dwellings as they are commonly called in the legal sense), there are different laws across States and local councils applying to their building and renting.

Different laws apply to the size of a block of land where a secondary dwelling can be built, the type of access, and in some cases, even the legality of collecting rent.

So when buying a property with a granny flat, besides familiarising yourself with the appropriate laws at a State and local level, your first priority should be finding out if the dwelling is legal with all appropriate compliance paperwork in place.

So what are the benefits and risks of buying a property with a granny flat?

Benefits

Accommodating family members

There is no doubt that part of the reason behind the exploding popularity of granny flats is the win-win solutions they provide for extended families. An elderly parent can live affordably on-site, while fulfilling the role of a handy babysitter. By paying mates-rates rent, an adult child can quickly save up for a deposit for their own house or an overseas odyssey.

Extra rental income

With new accommodation websites such as Airbnb or flatmates.com the possibilities of marketing an additional living space are now limitless. Granny flats can become handy earners.

Spreading your risk

If you have only one investment property, an extended vacancy can be cruel, but with the addition of a granny flat, you immediately have another rental income. The likelihood of two vacancies at the same time is highly unlikely.

More tax depreciation

If the granny flat is new, and is being rented, then the owner has the opportunity to claim depreciation. Before making a decision based on depreciation, you should first talk with a professional who can advise you on depreciation schedules.

Risks

Increased property management costs

An extra dwelling brings extra responsibilities and maintenance costs, particularly if there’s plumbing.

It may be vacant

The original purpose for your buying a property with a granny flat may change. The boomerang child may move out or you may no longer need a home office. If the granny flat is vacant for an extended period, maintenance will still be needed. Often, a vacant dwelling deteriorates more quickly than one that is occupied, and the last thing you need is a backyard eyesore.

You may reduce your rental market or resale potential

When it comes to reselling, the presence of a granny flat will reduce the size of your pool of potential buyers, and therefore may lead to a lower price than otherwise possible in a tight market.

Subdividing possibility

On a bigger property, the granny flat could effectively stop you from subdividing into two titles.

Granny flats have outgrown their name. Multi-purpose, adaptable, young and hip, these little dwellings can add a valuable punch to any property if handled wisely.