Is building a granny flat worth it?

It depends on the build cost and the rent it earns. A minor dwelling can add rental income or house family, and this calculator shows the yield and payback so you can judge whether the return stacks up.

What return does a minor dwelling give?

The return is the net rent, rent less running costs, as a percentage of the build cost. The payback period is the build cost divided by the annual net rent.

What costs come with a second dwelling?

Beyond the build, there are rates, insurance, maintenance and any management, plus the tax on rental income. Consents and connections can add to the build cost, so budget carefully.

Minor Dwelling ROI Calculator

This New Zealand calculator estimates the return on building a minor dwelling or granny flat to rent out. You enter the build cost, expected rent and running costs, and it shows the yield, the payback period, and the after-cost return, helping homeowners weigh a popular way to add rental income or house family.

Build cost (incl consents)

Weekly rent

Annual running costs

net rental yield on the build cost

Net rent per year$0

Payback period0

Value added potential-

The yield is net rent over the build cost; the payback is how long the rent takes to recover the build cost, before any rise in your property value, which a minor dwelling can also add. Rental income is taxable. Estimate only, not financial advice.

How it works

The calculator works out the net rent as the weekly rent over a year less the running costs, then divides that by the build cost to give the net yield. It also shows the payback period, the years of net rent needed to recover the build cost. On top of the rental return, a well-built minor dwelling can add to your property value, which is a further benefit not counted in the yield.

Worked example

A $180,000 minor dwelling renting at $450 a week earns $23,400 a year. Less $3,500 of costs, the net rent is $19,900, a net yield of about 11% and a payback of around 9 years. On top of that, it may lift the value of the whole property.

Related calculators

Rental Yield and Investment Calculator: rental returns.
Building a House guide: building costs.
Property Yield vs Term Deposit Calculator: compare returns.
ROI Calculator: return on investment.

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