Last updated October 2026
A dual income property in Melbourne is usually a main home with a small, self-contained second dwelling on the same block, such as a granny flat, where one or both homes can be rented out. In Victoria, the second home stays on the same title and cannot be sold separately. This guide explains how the setup works, who it suits, the costs to plan for and the general finance and tax points to raise with your advisers.
This guide is general information only and is not tax, legal or financial advice. Speak with a registered tax agent and a licensed finance professional about your situation.
Key takeaways
- A dual income property pairs a main home with a self-contained second dwelling on one lot.
- In Victoria, a small second dwelling can be up to 80m², cannot be subdivided and cannot be sold separately. From 15 October 2026, the maximum size of a small second dwelling increased from 60m² to 80m² under Amendment VC306. Read our guide to the 80m2 granny flat rules in Victoria (link to https://innovistagroup.com.au/80m2-granny-flat-victoria/).
- It can suit owner-occupiers who rent the granny flat, investors and families who want flexibility.
- Plan for the build, site costs, insurance, management and maintenance, not just the rent.
- Renting part of your property can affect tax and capital gains, so get advice before you build.
What is a dual income property in Melbourne?
The term describes one property that can produce two streams of rent, or one stream of rent while you live in the other home. In Melbourne, a common version is an existing house with a granny flat in the backyard.
Under Victoria’s small second dwelling rules, the granny flat:
- has a floor area of 80m² or less
- includes its own kitchen, bathroom and toilet
- sits on the same lot as an existing home
- does not need a planning permit in most residential zones, although lots under 300m² and some overlays may need one
- requires a building permit
- cannot be subdivided or sold separately
- can be rented out, with residential tenancy laws applying
The Victorian Government small second dwellings page sets out the official rules. Our guide to why you cannot build a granny flat on empty land explains why the main home comes first.
How the two homes work together
Because both homes sit on one title, a dual income property in Melbourne is bought, financed and eventually sold as a single property. That shapes how owners use it:
- Live in the house, rent the granny flat: you keep your home and lease the second dwelling.
- Live in the granny flat, rent the house: some owners, often downsizers, move into the smaller home and lease the larger one.
- Rent both: an investor leases each home under its own tenancy agreement.
- Family first, rent later: the granny flat houses parents or adult children now and is rented when needs change.
Every tenancy must follow Victorian renting laws, including minimum standards. See how to legally rent out a granny flat in Victoria for the details.
Who a dual income property suits
A dual income property in Melbourne can work well if you:
- already own a home with enough backyard space and side access
- are buying and want a block that can take a second dwelling later
- want rental income without buying a second property
- want the option to house family members on the same block
- are comfortable being a landlord or plan to use a property manager
It may suit you less if your block is small or heavily constrained, if you plan to sell soon, or if you value a large open backyard. Our guide to what makes a block suitable for a granny flat covers what to look for.
If you are buying with a granny flat in mind
First home buyers and investors sometimes look for a house on a block that can fit a granny flat. Before you buy, check:
- the lot size, shape and access for construction
- zoning and overlays such as heritage, bushfire or flood
- easements and restrictive covenants on the title
- where water, sewer and power connections are
- how much of the backyard you are happy to give up
Read our guides to house and granny flat packages and multi-gen living on one block for more ideas.
Costs to plan for
A dual income property in Melbourne has costs beyond the build. Plan for:
- the build itself, including permits and plans
- site costs such as long service runs, slopes or overlays
- a separate electricity meter if tenants will pay their own power
- landlord and building insurance
- property management fees
- repairs, maintenance and periods between tenancies
- council rates and any change in land tax, which your accountant can confirm
The standard G-Flat™ is a 60m², two bedroom turnkey home with a fixed price for each finish level.
| Finish level | Turnkey price |
|---|---|
| Affordable Lite | $195,000 |
| Affordable | $208,000 |
| Homestead | $218,000 |
| Signature | $238,000 |
| Luxe | $265,000 |
Prices are a guide for a standard 60m², two bedroom G-Flat™ and depend on your site. Sites 70km or more from the Melbourne CBD attract a 12.5% regional surcharge, sites with no driveway or tight backyard access attract a $7,000 surcharge, and sloping or elevated sites can affect the final price. A free site assessment confirms the price for your block.
Each price includes the building permit, all plans, connection of services up to 10m from the main house and a 10-year structural warranty. See granny flat pricing in Victoria for the full breakdown, and read about a separate electricity meter.
Finance for a dual income property in Melbourne
Owners commonly fund a granny flat through savings, equity in the existing home or a construction loan that releases funds in stages. Lenders differ in how they assess a second dwelling on one title and whether they count expected rent when working out what you can borrow. A licensed mortgage broker can compare options for you.
If you are a first home buyer, ask your broker how renting part of the property may affect any first home buyer concessions or grants you plan to use. Our guide on how to finance a granny flat build covers the main pathways.
General tax points
Tax depends on how the property is used, who lives where and whether rent is charged at market rates. In general terms:
- rental income must be declared on your tax return
- costs related to earning the rent may be deductible, such as a share of loan interest, insurance and management fees
- a new granny flat may be eligible for depreciation, which a quantity surveyor can schedule
- renting out part of your home generally means you are not entitled to the full main residence exemption from capital gains tax, although a partial exemption may apply
The ATO page on using your home for rental or business explains the capital gains rules. For more, read our granny flat tax and finance guide and depreciation schedules guide, then talk to a registered tax agent.
Thinking about selling later
Because the granny flat cannot be sold separately, it is sold with the main home. Buyers may be investors, multigenerational families or owner-occupiers who value the flexibility. Read what happens to your granny flat if you sell your Melbourne home.
Frequently asked questions
Can I sell the granny flat separately?
No. In Victoria, a small second dwelling cannot be subdivided or sold separately from the main home.
Can I live in the granny flat and rent out the house?
Yes, many owners choose this. Residential tenancy laws apply to the rented home.
How much rent will a dual income property in Melbourne earn?
Rent depends on the suburb, finish and demand. A local property manager can give you a rental appraisal.
Do I need a planning permit?
Usually not in most residential zones, but lots under 300m² and some overlays may need one. A building permit is required.
How long does a G-Flat™ take to build?
Approximately 5 months end to end, including the building permit, construction and connection of services.
Explore what your block can do
The first step is confirming whether your block can take a second dwelling. Book your free site assessment or visit our display G-Flat™.