What our analysis shows
Analysis by Granny Flat Numbers, data as of 23 October 2026
- A two-bedroom flat earns a higher net yield than a one-bedroom in 35 of 42 areas. The exceptions are places where one-bedroom rents are already high: Greater Sydney, South-west Sydney, Brisbane, City of Melbourne, Monash.
- Even with the whole build borrowed at 6.2%, the flat stays cash positive in every area we tested, from $4,020 a year in Ballarat to $15,101 on the Gold Coast. That is before principal repayments.
- Self-managing a Sydney flat adds $1,752 a year after tax. It is the largest cost you can remove; insurance and maintenance are much smaller.
- Your tax bracket matters more than most of the running costs: the same Sydney flat leaves $23,703 a year at the 16% rate and $17,134 at 45%.
Net yield on a 60 m² two-bedroom flat, top 8 areas
- Gold Coast (QLD)16.2%
- Cairns (QLD)14.9%
- City of Melbourne (VIC)14.4%
- Newcastle (NSW)14.4%
- Eastern Adelaide (SA)14.2%
- Brisbane (QLD)13.8%
- Sunshine Coast (QLD)13.8%
- Wollongong (NSW)13.4%
Net of agent fees, insurance, maintenance and extra water/rates, before tax and interest. Build cost from our model for the state; rent is the median for new bonds.
One or two bedrooms
A second bedroom adds about 15 m² and, in our cost model, roughly $41k to the build. Whether it pays depends on how much more tenants in your area pay for it. We compared a 45 m² one-bedroom with a 60 m² two-bedroom in every area.
| Area | 1-bed rent | 2-bed rent | Net yield 1-bed | Net yield 2-bed |
|---|---|---|---|---|
| Greater Sydney (NSW) | $550 | $650 | 12.8% | 12.4% |
| South-west Sydney (NSW) | $440 | $500 | 10.0% | 9.3% |
| Brisbane (QLD) | $590 | $650 | 15.4% | 13.8% |
| City of Melbourne (VIC) | $570 | $678 | 14.9% | 14.4% |
| Monash (VIC) | $495 | $589 | 12.7% | 12.4% |
| Wyndham (VIC) | $420 | $420 | 10.6% | 8.5% |
| Adelaide metro (SA) | $474 | $563 | 12.9% | 12.6% |
These are the areas where the one-bedroom wins. Everywhere else the second bedroom paid for itself. The gap is widest in outer suburbs and regional cities, where one-bedroom flats are scarce and rent cheaply while two-bedroom homes rent at close to house prices. In Logan, for example, the median one-bedroom flat rents for $315 and the two-bedroom house for $500. More detail in one versus two bedrooms.
If you borrow to build
We ran every area again with the full build cost borrowed at 6.2% interest. Interest is tax deductible because the money produces rent, so the after-tax cost of the loan is lower than the rate suggests. The weakest five areas:
| Area | Interest / year | Cash after tax / year |
|---|---|---|
| Ballarat (VIC) | $10,509 | $4,020 |
| Wyndham (VIC) | $12,338 | $4,419 |
| Regional SA (SA) | $9,889 | $4,756 |
| Brimbank (VIC) | $12,338 | $5,388 |
| Hume (VIC) | $12,338 | $5,712 |
All of them stay positive on interest alone. On a 30-year principal-and-interest loan the Sydney build costs about $16,169 a year in repayments, of which around $2,529 is principal in the first year. After those repayments about $8,455 a year is left, the after-tax rent of roughly 20 weeks. A rate rise of two points would take $3,080 of that after tax, so the flat still carries itself, but with little to spare on a weaker rent. Ways to finance the build compares a redraw, a construction loan and builder finance.
The costs we deduct
On a $650 a week Sydney flat the running costs come to $5,173 a year, or 16% of the rent:
- Vacancy: 2 weeks a year with no tenant, which equals one re-letting every two years.
- Agent: 7.7% of rent collected ($2,503). Letting fees and advertising usually come on top.
- Landlord insurance: $650 a year for a small detached dwelling.
- Maintenance: 0.6% of the build cost a year ($1,320). A new flat needs little at first; hot water and appliances come due after ten years or so.
- Water and rates: $700 a year that you cannot pass on unless the flat has its own water meter.
Land tax is left at zero by default because it depends on your state and land value. In NSW and Victoria renting out a granny flat can make part of your land taxable. Read granny flat land tax before you sign a lease.
How tax changes it
The flat's profit is added to your income, so the bracket you are in decides how much you keep. For the Sydney flat with no loan:
| Marginal tax rate | Cash after tax / year |
|---|---|
| 16% | $23,703 |
| 30% | $20,532 |
| 37% | $18,946 |
| 45% | $17,134 |
The capital works deduction softens this. You can claim 2.5% of the construction cost every year for 40 years, about $4,675 here, without spending anything. A quantity surveyor's depreciation schedule (around $400–700) documents the figure and usually adds a plant-and-equipment claim for the oven, hot water unit and air conditioner.
If the land is in two names, the rent and deductions split by ownership share. Putting the flat in the name of the lower-income owner is not possible unless that person owns the land.
All 42 areas
| Area | Build cost | 2-bed rent | Gross | Net | Payback |
|---|---|---|---|---|---|
| Gold Coast (QLD) | $198,500 | $750 | 18.9% | 16.2% | 8.4 |
| Cairns (QLD) | $169,500 | $600 | 17.7% | 14.9% | 9.0 |
| City of Melbourne (VIC) | $199,000 | $678 | 17.0% | 14.4% | 9.3 |
| Newcastle (NSW) | $187,500 | $640 | 17.1% | 14.4% | 9.3 |
| Eastern Adelaide (SA) | $187,000 | $628 | 16.8% | 14.2% | 9.5 |
| Brisbane (QLD) | $198,500 | $650 | 16.4% | 13.8% | 9.7 |
| Sunshine Coast (QLD) | $198,500 | $650 | 16.4% | 13.8% | 9.7 |
| Wollongong (NSW) | $187,500 | $600 | 16.0% | 13.4% | 9.9 |
| Western Adelaide (SA) | $187,000 | $585 | 15.6% | 13.1% | 10.2 |
| Townsville (QLD) | $169,500 | $520 | 15.3% | 12.8% | 10.4 |
| Merri-bek (VIC) | $199,000 | $600 | 15.1% | 12.6% | 10.5 |
| Adelaide metro (SA) | $187,000 | $563 | 15.0% | 12.6% | 10.6 |
| Launceston (TAS) | $164,500 | $495 | 15.0% | 12.5% | 10.7 |
| Greater Sydney (NSW) | $220,000 | $650 | 14.8% | 12.4% | 10.7 |
| Monash (VIC) | $199,000 | $589 | 14.8% | 12.4% | 10.7 |
| Southern Adelaide (SA) | $187,000 | $550 | 14.7% | 12.3% | 10.9 |
| Central Coast (NSW) | $187,500 | $550 | 14.7% | 12.2% | 10.9 |
| Hills and north-west (NSW) | $220,000 | $640 | 14.5% | 12.2% | 10.9 |
| Darebin (VIC) | $199,000 | $580 | 14.6% | 12.2% | 10.9 |
| Whitehorse (VIC) | $199,000 | $580 | 14.6% | 12.2% | 10.9 |
| Toowoomba (QLD) | $169,500 | $480 | 14.2% | 11.7% | 11.4 |
| Rest of NSW (NSW) | $187,500 | $520 | 13.9% | 11.5% | 11.5 |
| Knox (VIC) | $199,000 | $545 | 13.7% | 11.4% | 11.6 |
| Greater Hobart (TAS) | $193,000 | $520 | 13.5% | 11.1% | 11.9 |
| North-west coast (TAS) | $164,500 | $445 | 13.5% | 11.1% | 11.9 |
| Northern Adelaide (SA) | $187,000 | $500 | 13.4% | 11.0% | 12.0 |
| Moreton Bay (QLD) | $198,500 | $525 | 13.2% | 10.9% | 12.1 |
| Greater Bendigo (VIC) | $169,500 | $450 | 13.3% | 10.9% | 12.1 |
| Greater Geelong (VIC) | $169,500 | $440 | 13.0% | 10.6% | 12.4 |
| Western Sydney (NSW) | $220,000 | $560 | 12.7% | 10.5% | 12.5 |
| Logan (QLD) | $198,500 | $500 | 12.6% | 10.3% | 12.7 |
| Ipswich (QLD) | $198,500 | $500 | 12.6% | 10.3% | 12.7 |
| Casey (VIC) | $199,000 | $500 | 12.6% | 10.3% | 12.7 |
| Frankston (VIC) | $199,000 | $500 | 12.6% | 10.3% | 12.7 |
| Redland (QLD) | $198,500 | $490 | 12.3% | 10.1% | 13.0 |
| Whittlesea (VIC) | $199,000 | $480 | 12.1% | 9.9% | 13.3 |
| Regional SA (SA) | $159,500 | $380 | 11.9% | 9.5% | 13.7 |
| Hume (VIC) | $199,000 | $460 | 11.6% | 9.4% | 13.9 |
| South-west Sydney (NSW) | $220,000 | $500 | 11.4% | 9.3% | 14.0 |
| Brimbank (VIC) | $199,000 | $450 | 11.3% | 9.2% | 14.2 |
| Ballarat (VIC) | $169,500 | $370 | 10.9% | 8.7% | 14.9 |
| Wyndham (VIC) | $199,000 | $420 | 10.6% | 8.5% | 15.2 |
Payback in years after tax at 30%, no loan. Rents: NSW Fair Trading bonds July–September 2026 (detached dwellings), Queensland RTA September quarter 2026, Homes Victoria September quarter 2025, SA Housing Trust April–June 2026, Tasmanian Department of Justice January–June 2026 (detached dwellings). Western Australia and the ACT do not publish comparable bond medians by area, so they are not in this table; enter your own rent in the calculator.
This week's worked example
Week of 19 October 2026. A new example, rule and owner report every Monday.
A 40 m² one-bedroom flat with a standard finish on a block with some slope, services 8 m from the house, in Whittlesea: our model puts it at $164,000 turnkey ($144,000–$183,500), or $4,090 per m². At the area's median 1-bedroom bond rent of $375 a week it would return 9.1% net and pay back in 14.2 years after tax.
Rule check: NSW land tax thresholds are frozen from 2025 at $1,075,000 (general) and $6,571,000 (premium); the general rate is $100 plus 1.6% of value above the threshold.
From an owner (NSW, 2023): Replies agreed a new granny flat almost never adds its build cost to the sale price; buyers compare it with houses that have the same number of bedrooms.
Questions people ask
What is a good rental yield for a granny flat?
Measured on the build cost alone, the 60 m² flats in our data return 11–19% gross. That is far above the 3–5% a whole investment property earns, because you already own the land. If your figure is under 10% gross, check the quote or the rent.
Do I pay tax on granny flat rent?
Yes. Rent is income for the person who owns the land, and you can claim the running costs, interest on money borrowed for the build and 2.5% of the construction cost each year as a capital works deduction.
Should I count the land in the yield?
Not for this decision. You already own the land and keep it either way. What the flat does cost you is backyard space, and in some states a share of your main-residence tax exemptions; see our pages on land tax and capital gains tax.