A granny flat used to be a simple thing for a valuer to reason about: a small, self-contained space behind the main house, built to keep a parent close or give an adult child somewhere to land, rarely treated as a source of rent and rarely adding much to a sale price beyond the flexibility it offered a buyer. That has shifted. Queensland now lets secondary dwellings be rented to anyone, not only family, and the demand that has followed has changed how buyers, agents and valuers all think about the second roofline on a residential block.

The question the practice gets most often is some version of how much does the flat add. There is no single answer, because it turns on whether the structure is approved, whether renting it out is lawful on that particular lot, and whether the local market actually pays for it. Here is how the reasoning runs.

What makes a secondary dwelling a secondary dwelling

A secondary dwelling is a self-contained residence, its own kitchen or kitchenette, bathroom and sleeping area, built on the same lot and under the same title as a primary dwelling. That last point matters: it is not a separate lot in its own right, and it is not a dual occupancy, which is a different planning category with a different set of rules again. It also matters for finance and for a future sale, because a secondary dwelling cannot be sold off on its own. Local planning schemes generally cap how large a secondary dwelling can be relative to the primary dwelling and require it to read as subordinate, not as a second house competing with the first. Whatever the rental rules say, the structure still has to meet the building code and, where it has its own kitchen and bathroom, the plumbing and drainage requirements that a simple studio would not attract.

Approved, exempt or unapproved

Some secondary dwellings qualify as exempt or accepted development if they are small and modest enough, but the thresholds are specific and narrower than most owners assume. The rest need development approval, generally as a secondary dwelling under the local planning scheme, plus building approval for the construction itself. As with any other structure on a property, work built without the right approvals carries risk into the valuation. A flat with no record at council does not get treated as approved floor area, and its earning capacity is discounted for the cost, delay and uncertainty of regularising it, or the possibility that it cannot be regularised at all. On inspection the same signals that flag any unapproved addition apply here too: a roofline that does not match the original approval, services run to a shed or under-house space with no record of licensed work, and siting hard against a boundary or over an easement, which is the harder problem to fix once a flat is built rather than before.

What changed for rental income

For years the practical position in most Queensland council areas was that renting a secondary dwelling to someone outside the family sat close to an unapproved dual occupancy, so valuers were cautious about crediting a property with a separate income stream from the flat. Queensland’s planning rules have since been amended to allow a secondary dwelling to be rented to any tenant without the arrangement being treated as a second dwelling requiring its own approval, provided the structure was lawfully built and the local government area has not carved out an exception. Where that applies, the flat’s earning capacity becomes a legitimate part of the reasoning rather than something a valuer works around. It is still worth checking the position for a specific address before relying on it, because not every council has adopted the change in the same way, and other requirements such as on-site parking or a second sewerage connection can still apply. The practice’s rental yield tool is a starting point for testing what a second rental line is worth once it is confirmed lawful.

What adds value

Not every secondary dwelling earns its keep in a sale price, and the ones that do tend to share the same features:

  • Genuine self-containment. Its own kitchen, bathroom and entry, with no dependency on walking through the main house.
  • Separate access and parking. A private path or driveway, and somewhere for a tenant’s car that does not compete with the main dwelling’s parking.
  • Privacy from the main house. Windows, outdoor space and sightlines that give both households some separation, which matters as much for a tenant as for a live-in relative.
  • A finish that matches the market. Presentable and durable, but not so highly specified that the cost outruns what a tenant in that suburb will pay in rent or a buyer will pay at resale.
  • Genuine local demand. Proximity to a hospital, university, transport corridor or employment precinct, where a self-contained rental actually lets, rather than a flat built because the block happened to have room.

What overcapitalises

The failure mode runs opposite to a standard renovation in one sense and the same way in another, and the practice has covered how spend and added value part company once a renovation goes further than the market rewards; a secondary dwelling raises the same issue with an extra twist. A large, expensive flat squeezed onto a small block can eat into the yard, the parking and the outlook that buyers of the main house are paying for, so the addition works against the property it was meant to improve. Specification is the other trap: a flat fitted out to a standard the local rental market does not reward will not return its cost, and the gap between what was spent and what the market pays sits with the seller, not the market. Land carries the durable value in most residential valuations, and a secondary dwelling is an improvement like any other: it adds what the market says it is worth, not what it cost to build.

How the valuer treats it in the figure

The primary evidence is still direct comparison, weighed against sales of properties with a similarly approved, similarly positioned secondary dwelling, the same discipline the practice applies to any residential valuation. Where those comparables are thin, achievable market rent for the flat is useful supporting evidence of its contribution, not an instruction to capitalise that rent and add it on top of the house figure. Approval status decides whether the floor area and income capacity are counted at all: a lawfully built, lawfully rented secondary dwelling earns its place in the reasoning, while an unapproved one is set aside until its status is resolved. Lenders can also take a more conservative view of a secondary dwelling than the open market does, which is one more reason a bank’s figure and an independent market valuation rarely match exactly. None of that changes the underlying question a valuation has to answer: not what the flat cost, and not what it could theoretically earn in the best case, but what an informed buyer would actually pay for the property with that flat sitting on it, on the evidence available at the date of the valuation.