What our analysis shows
Our calculations, data as of 23 October 2026
- If a Sydney flat adds half its $220,000 build cost to the sale price, you need about 5.4 years of rent to break even. If it adds nothing, 10.7 years.
- In stronger rental areas the sale price matters less: on the Gold Coast, even a flat that adds nothing at sale is paid off in 8.4 years. In weaker areas it matters more.
- Buyers compare a house with a flat against houses with the same total bedrooms and bathrooms, and add something for the income; owners in the forum threads we read describe the same thing. They do not pay what the flat cost to build.
- An unapproved flat can subtract value: buyers and lenders price in the cost of legalising or removing it. One 2025 NSW buyer faced about $15,000 of compliance work before the flat could be rented.
Share of its cost the flat must add at sale if you sell after 5 years
- Gold Coast (QLD)40%
- Greater Sydney (NSW)53%
- Merri-bek (VIC)53%
- Adelaide metro (SA)53%
- Logan (QLD)61%
- Wyndham (VIC)67%
60 m² two-bedroom flat, five years of after-tax rent from bond medians, no loan. Anything the sale adds above this share is profit.
Why buyers pay less than cost
A valuer compares your property with recent sales. A three-bedroom house with a two-bedroom flat competes with five-bedroom houses, which in most suburbs sell for less than a three-bedroom house plus the cost of a new flat. Families may not want a tenant in the yard; investors pay for the income but value it with the same caution as any rent. And the flat cannot be sold separately, so its value is tied to the buyers who want both dwellings.
That does not make the flat a bad idea. It means the case has to rest on what it earns, or on who lives in it, while you own it.
Years of rent you need
Rent you collect plus value added at sale has to cover what you spent. Years of after-tax rent needed, by how much of its build cost the flat adds at sale:
| Area | Build cost | 0% | 25% | 50% | 75% | 100% |
|---|---|---|---|---|---|---|
| Gold Coast (QLD) | $198,500 | 8.4 | 6.3 | 4.2 | 2.1 | 0.0 |
| Greater Sydney (NSW) | $220,000 | 10.7 | 8.0 | 5.4 | 2.7 | 0.0 |
| Merri-bek (VIC) | $198,800 | 10.5 | 7.9 | 5.3 | 2.6 | 0.0 |
| Adelaide metro (SA) | $187,000 | 10.6 | 8.0 | 5.3 | 2.7 | 0.0 |
| Logan (QLD) | $198,500 | 12.7 | 9.5 | 6.3 | 3.2 | 0.0 |
| Wyndham (VIC) | $198,800 | 15.2 | 11.4 | 7.6 | 3.8 | 0.0 |
Rent: median of new bonds for 2-bedroom detached dwellings or houses. Cash after agent fees, insurance, maintenance and tax at 30%; no loan; no allowance for rent growth, which would shorten every figure.
If you plan to sell within five years, a flat in most areas pays for itself only if buyers pay more than about half its cost. If you will hold for ten years or more, what it adds at sale is a bonus rather than the business case.
Borrowing stretches every figure. With the whole Sydney build on a 6.2% loan, interest only, after-tax cash falls to $10,984 a year, and breaking even with nothing added at sale takes 20.0 years rather than 10.7. The rented share of the property is also subject to capital gains tax when you sell, which takes part of whatever value the flat adds; see capital gains tax.
What makes a flat add more
- Approval on file. The occupation certificate or final inspection, so buyers and lenders can count it.
- Separate access and private yard. A side gate and its own outdoor space make it rentable to strangers, which widens the buyer pool.
- A lease in place at market rent. Investors value income they can see.
- Separate meters and a registered address. They make it simple for a buyer to rent it out on day one.
What makes it add less
- No approval. Buyers price in the cost of legalising or demolishing it; see unapproved granny flats.
- Lost yard in a family suburb. Where buyers are mostly families, a flat that takes most of the garden can narrow the market.
- Tax for the next owner. A buyer who will rent the flat out faces the same land tax and capital gains questions; see land tax.
This week's worked example
Week of 19 October 2026. A new example, rule and owner report every Monday.
A 70 m² two-bedroom flat with a standard finish on a block with some slope, services 15 m from the house, in Adelaide metro: our model puts it at $226,600 turnkey ($199,500–$254,000), or $3,240 per m². At the area's median 2-bedroom bond rent of $563 a week it would return 10.3% net and pay back in 12.8 years after tax.
Rule check: In Tasmania's January–June 2026 bonds, Greater Hobart detached two-bedroom dwellings rented for a median $520 a week against $500 for two-bedroom flats.
From an owner (NSW, 2023): Several posters warned that asking council about legalising a flat, or a bank valuer's visit, can put an unapproved flat on the council's radar.