How This Granny Flat ROI Calculator Works
A granny flat (also called a minor dwelling or second self-contained unit) lets you add a rentable home on land you already own, so you skip the largest cost of a standalone rental: buying a section. This calculator turns four inputs into the four numbers most investors want to see.
- Gross rental yield = effective annual rent divided by the all-in build cost. It measures the income before any running costs.
- Net rental yield = annual net income divided by the all-in build cost. This subtracts your operating costs and is the more realistic measure.
- Annual net income = effective rent (after vacancy) minus operating costs such as rates, insurance, and maintenance.
- Simple payback period = build cost divided by annual net income. It is the rough number of years for the rent to repay what you spent to build, ignoring tax, financing, and any change in property value.
Worked Example
Using the default figures, a $230,000 all-in build, $480 a week rent, $4,000 a year in operating costs, and a 2 week vacancy allowance:
| Gross rent (full 52 weeks) | $480 × 52 = $24,960 |
| Less 2 weeks vacancy | $480 × 2 = $960 |
| Effective gross rent (50 weeks let) | $24,000 |
| Gross rental yield | $24,000 / $230,000 = 10.43% |
| Less operating costs | $4,000 |
| Annual net income | $24,000 - $4,000 = $20,000 |
| Net rental yield | $20,000 / $230,000 = 8.70% |
| Simple payback period | $230,000 / $20,000 = 11.5 years |
These match the default outputs shown by the calculator above.
What a Granny Flat Costs to Build in 2026
All-in build costs (design, council consent, the build itself, and connecting services) for a one to two bedroom granny flat in New Zealand typically range from about $180,000 to $280,000 in 2026, with site works, slope, and finish level being the biggest swing factors. A prefabricated or transportable unit can be at the lower end, while a fully site-built two bedroom unit with significant groundworks sits higher. Always get firm quotes before relying on a figure, and include consent, connection, and contingency costs in your all-in number rather than just the headline build price.
What Rent Can a Granny Flat Earn?
Weekly rents for a self-contained granny flat commonly fall between $400 and $600 depending on the region, the number of bedrooms, parking, and whether power and internet are included. Main centres and well-located units sit at the upper end, while smaller or regional units sit lower. Check recent listings for comparable units in your suburb rather than relying on a single average, and remember that a granny flat shares a site with the main house, which can affect what tenants will pay.
Tax on Granny Flat Rental Income
Rental income from a granny flat is taxable and must be declared to Inland Revenue. You pay income tax on the net rental profit, which is rent received less allowable expenses such as rates, insurance, repairs, maintenance, and deductible interest. Renting to a family member at below market rent can limit the expenses you may claim. Depreciation on chattels, GST (if you are or become GST registered), and the bright-line and interest deductibility rules may also apply. This calculator shows the return before tax and before financing, so your after-tax, after-finance return will be lower. Get advice from an accountant for your own situation.
Limits of This Calculator
The figures here are indicative. They exclude income tax on the rent, financing costs such as mortgage interest if you borrow to build, and any capital gain or loss on the property. Simple payback also ignores the time value of money and rent or cost inflation, so treat it as a rule of thumb rather than a precise forecast. The rent you enter is your own estimate.
Related Calculators
Sources: Industry 2026 New Zealand granny flat and minor dwelling build cost guides; regional rental market guides for self-contained units. Inland Revenue, rental income and expenses (ird.govt.nz). Figures are indicative; confirm build costs, achievable rent, and your tax position before deciding.
This calculator provides indicative estimates only and is not financial, tax, or investment advice. It excludes tax on rental income, financing costs, and capital gains or losses. Build costs, rents, and your return depend on your specific property, location, and circumstances. Get advice from a qualified professional before making a decision.
