Vicki and Mark Stephenson: cash flow grannies

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Mark Stephenson had to coax his wife to ease her way back into property investment. Vicki’s a tax accountant, but she is definitely not a fan of a common tax busting technique - negative gearing. 

“He was the one that said a few years ago ‘it’s time to get back into property again,’ ” Vicki remembers.

“And I said, ‘no, no, no I don’t want to. I’ve seen people struggle with negatively geared properties and I just wasn’t interested in it. Additionally, I didn’t want anything that impacted on my lifestyle.”

The couple had steered clear of the property market for the better part of the mid-2000s because the increase in prices had made positive gearing an endangered species. But Mark was convinced there were some new opportunities given the softening market that could help satisfy Vicki’s cash flow obsession.

Hunting for cash flow

Vickie somewhat reluctantly started researching and since they had experience sub-dividing and building dual occupancy residences in the past, she immediately thought that might be a tactic worth revisiting.

“Years ago we did do a dual occupancy in Blacktown, and we had done quite well on it,” she remembers. They had no problem selling the properties right away for a healthy profit, though nowhere near what they could get for them now. “It kills me to do the math on it now because those two properties would be worth at least $800,000,” she says. 

“And so I said to my husband, it would be great to go back and do a dual occupancy again. But then reading on dual occupancy, you realise that you just can’t do it anymore as clear cut as you used to be able to do it.”

But in New South Wales, the rules for granny flats had actually become much more clear-cut. Legislation passed in 2009 aimed at increasing affordable housing relaxed the rules and streamlined approvals across the state for secondary units as long as the property fits some basic criteria.

“When I found out about that, that was exciting,” Vicki remembers.  “I saw the granny flats as a really viable alternative.”  

Vickie’s excitement was soon tempered by her more conservative nature, and she says she spent months researching websites and discussion forums in order to make sure the strategy would work for her.  Finally, she got a hold of several different builders and cobbled together a list of criteria that she would need in her new property.

Vicki’s granny flat checklist

1.       Get your finance ready first – you need to know whether you need to get a construction loan or if you can pull enough equity out in order to build it then refinance.

2.       Do your research – look at property forums and websites in order to educate yourself about granny flats and the market you’re looking into.

3.       Pick a good builder – online property forums contain a lot of information and reviews of builders specialising in granny flats across Australia. She picked Granny Flats Australia after finding good reviews online. 

4.       Consider a one-stop shop if you’re time poor – there are buyer’s agents that (for a fee) will find the property for you and line up the builder. It’s not the route Vicki took, but a good option if you can’t put in the time yourself.

The search

Vicki says all in all she spent a fair amount of time researching properties and different granny flat designs, and says she could see it overwhelming some investors. “People should really consider a one-stop shop if you’re time poor,” she says. “Because otherwise be prepared to spend some time doing your research.”

By ‘one-stop shop’, Vicki is referring to the growing number of buyer’s agents that specialise in finding properties suitable for a granny flat and that have partnered with builders or have there own builder in-house, so they can literally take care of you straight through from search to build to completion.  Of course, Vicki says, they come with a price.

So she decided she could handle the search, and she went with a builder that promised to handle the rest from council approval to completion.

The couple pretty early on focused their property search on the Western Sydney suburb of Blacktown. Vicki says they had owned investment properties in the area in the past and had never had much trouble renting them out and she remembered that the suburb’s streets tend to feature rather large blocks. Oh, and being relatively close to her Western Sydney home, yet being able to keep the price tag under $400,000 were definite pluses as well, Vickie says.

Once she got the ball, or in her case the mouse, rolling it didn’t take too long for her to spot the right lot. The property had been on the market for a while, and when she finally made an offer she quickly found out why.

“So I must have only looked at about five properties, and then went ahead and put in an offer on this one, she remembers, “and then it took a full month for them to sign the contract.”

She came very close to giving up on the cute little 3-bedroom with a giant backyard, even going so far as restarting her search. “And then all of a sudden he just changed his mind and signed the contract.”

The previous owner was elderly and had moved to a nursing home, and she says she later learned that the family had never had any real experience dealing in real estate. She says she feels good about the price she paid. At $320,000 it was $30,000 less than the listing price, but from the outset she says she knew she would be spending that $30,000 on renovating the very outdated kitchen and bathroom. But other than that the house was in pristine shape.

Better yet, Vickie says, the backyard was just right.

“I specifically looked for a property that would suit a granny flat, and I also specifically looked for something where I could fence it off and there was driveway access to the back even though you don’t technically need it, that is what I looked for. It is basically like a battle axe.”

Treasure in the backyard

She even went so far as to have her builder, Granny Flats Australia, come out and take a look before she made the offer.

“They said yes this works. It was just good to have someone come out and pat you on the head and say yes it can be done, you were right,” she says. “Because for me the numbers only worked with a granny flat on there.”

What she got was a 60sqm flat that commands $370 per week, just $30 less than the bigger house up front. She says the builder gave her the chance to tailor it a bit, and she had her own ideas for how it could better fit the demographics of the area. “I wanted two bedrooms that were good size so that we could either have two singles sharing or a single mum with kids or single dad with kids,” she says.

“I even made sure I put a bath in there as well as a shower, because I figured that parents would want to bathe their kids.”

The Stephenson’s custom granny flat is helping to turn what would have been a negatively geared investment with some decent capital growth potential into nearly $100 in her pocket every week.

It is too early to tell how the development will affect the property’s value, though Vicki says she plans to have the property reappraised later this year as they look to pull some of the equity out to fuel their next property investment.


The Stephensons' granny flat in action

Purchase Price




Granny Flat Build


Driveway, extras






Rent (weekly)


Main house


Granny flat




Yearly rent




Yield, with Granny


Yield, house alone



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