How to Get a Granny Flat Construction Loan

Granny flat Finance (The Granny Flat Home Loan)

Cash is king. It’s a phrase you would have heard many times. In the world of property investment “Cash flow” is king, at least to some investors. Perhaps not every property is suitable for a granny flat but those who have done it make compelling arguments in favour of the use of the minor dwelling as an investment tool.

It is not uncommon for granny flats to return 15% gross yield. That is, a dwelling that costs $100,000 to build may rent for $300 per week.

The appeal to investors becomes evident when you look at the cost of borrowing $100,000 in today’s mortgage market.  At a rate of 4.8% ( cheaper rate may be available) the repayments would be $4800 per year.

You can see that the gross rent from the dwelling before cost is $15,000 and the interest expense is in this case just $4800.

There are many considerations when making investments of any kind. However, without a doubt investors need cash flow (more cash coming in than going out ) if they are to continue to invest in property. Researching ways to achieve this is part of a sound strategy.

Often, customers have sufficient equity in the existing home to finance the construction of a granny flat or minor dwelling. However, when this is not the case a construction loan for the minor dwelling is required.

Your broker can show you which finance option for your granny flat is the most suitable for your situation.

There a several ways to finance minor dwellings and each way has different pros and cons.