With interest rates still high, Melbourne’s rental vacancy rates sitting at historic lows, and a growing population placing pressure on housing supply, it’s no surprise homeowners and investors alike are asking: Are granny flats still a smart investment in 2025?
The short answer? Absolutely, but only if you approach the project with the right strategy and support.
Whether you’re looking to generate passive income, accommodate family members, or future-proof your land, granny flats for investment Melbourne homeowners build today can deliver serious long-term benefits, both financially and in terms of lifestyle.
In this article, we’ll break down the real ROI of granny flats in Victoria, explore how they stack up against traditional property investments, and explain why 2025 may be the most strategic time yet to build one.
Understanding The Value Proposition Of A Granny Flat
Granny flats, also referred to as secondary dwellings, are self-contained, standalone homes built on the same land title as your main residence. They typically feature everything needed for independent living: a kitchen, bathroom, bedroom(s), living space, and private entrance.
Unlike subdivisions, which can be costly and time-consuming, a granny flat can be constructed without creating a new title, making it an accessible and scalable solution.
But what really makes granny flats for investment Melbourne homeowners choose the three key value streams they unlock:
- Consistent rental income from long-term or short-term tenants
- Boosted property valuation, enhancing equity
- Versatility for future use, family housing, guest accommodation, or resale leverage
Let’s Talk RoI: The Real Numbers
To understand the return on investment, let’s use a real-world example based on Innovista Group’s Signature range.
- Build cost: $208,000 (Lana 60 Signature Granny Flat)
- Estimated weekly rental: $500–$550
- Annual rental income: $26,000 to $28,600
- Gross rental yield: 12.5% to 13.75%
Now compare that to the typical Melbourne property yield of 3–4%. Even after accounting for insurance, basic maintenance, letting fees, and vacancy periods, most granny flats deliver a net yield of 8–10%.
That’s a strong performance in any market, and especially attractive in a climate where traditional property returns are squeezed.
Beyond Rent: How Granny Flats Add Value
1. Increased Property Valuation
A fully approved, well-built granny flat can raise your property value by $100,000 or more, depending on the suburb demand and finishes. That means instant equity uplift, which you can leverage to refinance or invest again.
Buyers today actively look for multi-generational layouts or income-generating setups, giving you a resale edge in a competitive market, another reason why granny flats are the future of multi-generational living in today’s property landscape.
2. Tax And Depreciation Benefits
As a new build, your granny flat comes with a long list of depreciable assets, including structure, appliances, cabinetry, lighting, and flooring. This allows you to claim depreciation deductions through your tax return, further increasing the financial return of your investment.
And just as important, smart planning from day one can help you avoid surprise fees, something we cover in Building On A Budget: Avoid Hidden Costs In Granny Flat Projects.
Always consult a licensed accountant or financial advisor before claiming any deductions.
3. Lifestyle Savings Through Family Use
If you’re using your granny flat to house ageing parents or adult children, you’re likely saving tens of thousands annually in alternative accommodation costs, whether that’s aged care, rentals, or interstate relocation.
And the added privacy, autonomy, and emotional support of being close to family? Priceless.
Why 2025 Is The Smartest Time To Build Yet
Rental Demand Is At Record Highs
Melbourne’s rental vacancy rate is currently sitting below 1% in many suburbs, making second dwellings one of the most in-demand housing types. Suburbs like Craigieburn, Clyde North, Werribee, and Pakenham are seeing a flood of tenant applications for well-designed granny flats.
For investors focused on rental income from granny flats, this means less downtime, faster leasing, and premium tenants.
Material Costs Have Stabilised
After the 2022–2023 supply chain disruptions and price hikes, building materials and trades have finally levelled off. Innovista offers fixed-price contracts, so you can avoid price creep and budget surprises.
Council Processes Are Streamlining
Victoria’s planning framework continues to shift in favour of density. More councils are now approving granny flats as “as-of-right” developments, removing the need for lengthy planning permits and saving homeowners 3–6 months of waiting time.
What Makes Innovista Group Stand Out?
Many builders claim to specialise in granny flats, but few offer the design sophistication, fixed pricing, and project transparency that investors truly need.
Innovista Group is a premium builder with an investor mindset. Their Lana Series includes:
- 7-star energy ratings
- Full-size kitchens with European appliances
- Stone benchtops and hybrid timber-look floors
- Double-glazed windows and climate control in every room
- Private laundry, bathroom, and open living areas
These features make your granny flat more livable and more rentable. High-quality inclusions reduce vacancy and increase the quality of tenants you’re likely to attract.
But the real value? Innovista manages the entire process:
- Site inspection and feasibility
- Permit submission and design drawings
- Engineering, soil reports, and compliance
- Construction, final certification, and handover
- Full warranty and structural protection
No hidden costs. No handballing between consultants. Just one team accountable from start to finish.
Real Case Study: $240K Investment, $550/week Rent
In early 2024, a couple in Bentleigh East built a Lana 60 Luxe with Innovista Group. Their total investment came to $240,000, including landscaping, appliances, and permit costs.
Within one week of completion, they had a signed tenant at $550 per week, a 12% yield from day one.
They estimate an uplift of $100,000 to their overall property valuation, which they’re now using as leverage to purchase their next investment property, and yes, that will also include another granny flat for investment Melbourne tenants are lining up for.
FAQs: Are Granny Flats Really Worth It?
Q: Can I rent it out immediately after building?
Yes, provided your property complies with local zoning and the dwelling is fully certified. Innovista ensures you’re tenant-ready at handover.
Q: Is it better to rent to family or on the open market?
That depends on your goals. Renting to family may offer flexibility and support, but renting externally often delivers stronger cash flow.
Q: What suburbs are best for granny flat investment?
Growth corridors like Tarneit, Officer, Cranbourne, and Point Cook are seeing strong rental demand and infrastructure expansion, ideal for granny flat ROI.
Final Thoughts: Do It Right, and It Pays for Itself
Granny flats in Melbourne aren’t just a short-term play; they’re a multi-use, multi-decade asset that pays for itself in income, capital growth, and lifestyle adaptability.
In 2025, the combination of tight rental markets, improved council processes, and smarter designs will make this one of the best times in recent memory to build.
But execution matters. With transparent pricing, streamlined approvals, and homes designed for real living, Innovista Group helps you build smarter, not harder.
Your land could be earning for you right now. Contact Innovista Group to discuss your goals and receive a free feasibility report on your site. Whether for granny flats for investment in Melbourne suburbs demand or future-proofing your family home, we make it easy to start.
Looking to unlock consistent passive income? Discover how rental income from granny flats can
