As granny flats gain popularity across Melbourne and regional Victoria, more homeowners and property investors are discovering their potential as high-return secondary dwellings. Whether used for rental income, family accommodation, or multigenerational living, a well-planned granny flat build can significantly increase your property’s value and earning potential.

But the real question is – how do you make sure your granny flat investment actually pays off?

In this guide, we explore five proven ways to maximise your return on investment (ROI) with granny flats for investment in Melbourne. From location and design to builder selection and rental strategy, these insights will help you make smarter property decisions that deliver results.

Why Granny Flats Are a Growing Investment Strategy

There is a growing trend toward smaller, self-contained homes that offer flexibility, affordability, and lifestyle benefits. Granny flats meet all of these needs while also providing:

• A new stream of passive income
  
• Added resale value for your existing home
  
• A pathway to support aging parents or adult children
  
• A lower-cost entry into the property investment market
  

When built and managed correctly, the rental income from granny flats can rival returns from standalone dwellings – often with lower upfront investment.

1. Choose the Right Suburb for Strong Demand

As with all real estate strategies, location is a major driver of ROI. Granny flats perform best in suburbs with a combination of high rental demand, strong infrastructure, and flexible council regulations.

Top factors to consider when selecting a location:

• Proximity to schools, public transport, and shopping centres
  
• Suburbs undergoing gentrification or infrastructure growth
  
• Local council policies that support second dwellings or dual occupancy
  
• Demand for affordable rental housing or multigenerational living
  

For example, granny flats in Dandenong, Werribee, and Geelong are increasingly popular due to their affordability and local demand. Working with experienced granny flat builders in Melbourne, like Innovista Group, can also help identify suburbs with the best investment potential.

2. Design for Flexibility and Future Use

A granny flat should never be a one-size-fits-all solution. To truly maximise ROI, your design should cater to both today’s rental market and tomorrow’s family needs.

Smart design considerations include:

• Private entrance for tenant privacy
  
• Full kitchen and bathroom amenities
  
• Open-plan layouts to maximise small space living
  
• Separate utilities or metering for ease of management
  
• Energy-efficient features to reduce costs
  

Granny flats like Innovista’s Lana Series are designed to be flexible enough to serve as a long-term rental, short-term Airbnb, or comfortable housing for elderly parents or young adults. The more versatile your design, the higher your long-term ROI.

3. Get Clear on the True Cost to Build

One of the biggest factors in investment success is knowing your numbers. Understanding the granny flat cost upfront allows you to make informed decisions and accurately forecast your payback period.

Granny flat cost factors include:

• Site preparation and foundations
  
• Council permits, inspections, and planning applications
  
• Design complexity (standard vs. custom builds)
  
• Inclusions such as fixtures, appliances, and landscaping
  
• Utility connections and metering
  

In Melbourne, the average cost to build a granny flat ranges from $120,000 to $200,000, depending on size and finishes. A 2-bedroom granny flat typically delivers the highest ROI due to higher rental income potential.

Innovista offers fixed-price quotes and full-service design and approval packages, helping investors avoid unexpected costs and maximise profitability.

4. Maximise Rental Income with Smart Leasing Strategies

Generating reliable rental income from granny flats depends on how you position and manage the dwelling. Whether you’re offering long-term leases or short-term rentals, the goal is to keep occupancy rates high and expenses low.

Tips for increasing your granny flat income:

• Research comparable rental rates in your suburb
  
• Add features like air conditioning, built-in storage, and laundry
  
• Use professional photos and detailed listings for marketing
  
• Offer flexible leasing terms to attract a wider tenant base
  
• Consider Airbnb during peak seasons (subject to council rules)
  

With high-quality granny flat builds in the right locations, rental yields of $350 to $500 per week are achievable. Over a year, that can translate to $18,000 to $25,000+ in annual income – making it a standout investment.

5. Partner with a Trusted Granny Flat Builder in Melbourne

Your builder plays a critical role in the success of your granny flat investment. From compliance and permits to finishes and final delivery, every stage of the project affects ROI.

What to look for in a granny flat builder:

• Experience with dual occupancy and second dwellings
  
• Full design-to-handover service
  
• Transparent pricing with no hidden extras
  
• Familiarity with local council requirements
  
• Proven portfolio of completed projects in Victoria
  

Innovista Group offers turnkey granny flat builds tailored to investment and lifestyle outcomes. With pre-designed and custom options, as well as council support and fixed timelines, Innovista removes the stress from your granny flat journey – helping you stay on time, on budget, and on track to ROI.

Final Thoughts: Smart Investments Start With Smart Planning

A granny flat isn’t just a backyard addition – it’s a strategic asset that can unlock serious financial benefits. When planned properly, it can provide high rental yields, boost your property’s overall value, and offer flexible living options that grow with your family.

Whether you’re a seasoned investor or a homeowner exploring second dwelling opportunities, these five strategies – choosing the right location, designing for flexibility, controlling costs, maximising rental income, and selecting the right builder – will help you make confident, profitable decisions.

If you’re ready to explore granny flats for investment in Melbourne, or want to unlock rental income from granny flats on your property: Start your investment journey with Innovista today.