Most of us remember the big moment we left home to venture out on our own. An aging population and a tendency for teenagers to stay home for longer means a ‘granny flat’ can add significant value to your property. How much hinges on a number of factors, but some estimate that a granny-flat can add between 20 and 30 per cent of what it cost to your property’s bottom line.

This isn’t a blanket rule for everyone. If a sleep-out is going to dominate your back yard, block the view or take up the last patch of lawn, try considering turning your garage or unused space under your home into another living area instead.

When adding a second dwelling to your property, you might want to consider freehold subdividing or cross-leasing your property. A freehold subdivision grants the granny-flat with its own legal title. It will need an access way, and all the utilities you’d expect in a normal home, plus subdividing the land may involve a lawyer, surveyor and engineer. 

Once very common, cross leases are usually seen across blocks of flats. With a cross lease, a number of people own the undivided land and the homes are effectively leased from each other. Areas around each dwelling are designated as belonging to that unit, with possibly some common land in-between. Again, you would need to ensure the second property was fully-self-contained, and drawing up a cross-lease may involve a lawyer, surveyor and engineer.

Read more: Adding another room on to your property

By dividing the land, you can sell one of the dwellings separately if you need a quick cash injection. Depending on the size and location of the sleep-out and original home, there may be more money to be made from the sale of two properties versus one.

When it comes to boosting the value of your rental property investment, an alternative is to do 'nothing' to the land and simply build the granny flat in your backyard. By not dividing the land you can’t sell the granny-flat separately, but you can still rent it out. So long as you meet your local council’s consent and guidelines, and depending on the size and location, a small sleep-out on your property can add a few hundred dollars to your weekly income.

With a cross lease or freehold subdivision, you could also rent out both dwellings on the property, but you should exercise caution here. It’s likely both sets of tenants will be living fairly close together, and as the landlord you might be responsible for mediating disputes. We recommend being extra thorough with tenant background checks.

When selling your property, a sleep-out’s value is twofold. Buyers will be aware and willing to pay more for a property that gives them a passive income. Buying a home and gaining a rental property too will seem like a bargain. Even if they’re not thinking of renting, can anyone put a dollar value on the peace, quiet and independence that comes with extra space between a teenager or in-laws?

Download our A-Z guide is a handy guide to help you navigate the property investment world, and make buying, leasing, and selling homes that much easier: