Granny Flats or Duplexes: Which Option Offers Better Rental Returns in Victoria and Queensland?

Thinking about boosting your rental income with a property addition? For many Australians, the choice often comes down to granny flats or duplexes. Both can deliver strong returns, but they work in very different ways.

If you’re in Victoria or Queensland, where housing demand remains strong and rental markets are tight, you may be wondering which option is the smarter investment.

Let’s break it down together so you can decide what’s right for your situation.

Why This Matters Right Now

Australia’s rental crisis isn’t going anywhere. As of mid-2025, national vacancy rates are hovering around 1.2%, well below a balanced market of 3%.

Both Victoria and Queensland continue to experience strong population growth, driven by migration and interstate relocations. For homeowners and investors, this environment creates a unique opportunity: additional dwellings like granny flats or duplexes can command healthy rents and meet genuine community demand.

But with limited budgets, differing council rules, and long-term goals in play, the choice between the two isn’t straightforward.

What Exactly Is a Granny Flat 

A granny flat also known as a secondary dwelling is a self-contained unit built on the same block as an existing house. Think of it as a compact home with its own entrance, kitchen, bathroom, and living space.

• Typical size: 40–60 m² (though some states allow up to 80 m²).
  
• Who rents them: Singles, young couples, downsizers, or adult children.
  
• Cost to build: $120,000–$200,000 (depending on finishes and size).
  
• Rental income: In Victoria, $300–$450 per week; in Queensland, $350–$500 per week depending on location.
  

For many homeowners, granny flats are a cost-effective way to unlock rental income without buying another property outright.

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What About Duplexes?

A duplex is a dual-occupancy property where two dwellings share a common wall but sit on separate titles (in most cases). Each side has its own entrance, garage, and amenities, making them closer to two full-sized homes rather than add-ons.

• Typical size: Each dwelling can be 2–4 bedrooms.
  
• Who rents them: Families, professionals, or long-term tenants wanting space.
  
• Cost to build: $500,000–$700,000+ (significantly higher due to land, design, and subdivision costs).
  
• Rental income: In Victoria, $450–$650 per week per side; in Queensland, $500–$700 per week per side depending on location.
  

Duplexes are more capital-intensive but can deliver larger gross rental yields. They also offer the potential to sell each side separately, creating instant equity uplift.

Regulations: Victoria vs Queensland

Before you start drawing up plans, you need to understand the rules.

Victoria

• Granny flats (called dependent person’s units) are traditionally restricted to housing family members. However, reforms are loosening restrictions to allow more rental opportunities, given the housing shortages.
  
• Many councils still require occupancy to be tied to a dependent relative unless exemptions apply.
  
• Duplexes require council approval, subdivision, and compliance with local zoning—more complex but more flexible once built.
  

Queensland

• Secondary dwellings are more flexible. As of 2022 reforms, you can rent out a granny flat to anyone, not just relatives.
  
• This has fuelled a surge in granny flat builds across Brisbane, the Gold Coast, and regional hubs.
  
• Duplex developments are encouraged in Medium Density Residential Zones but still require council approval and subdivision.
  

In short: Queensland offers a clearer path for renting out granny flats, while Victoria remains slightly more restrictive (though easing).

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Cost vs Returns

Here’s a quick comparison for investors looking at Victoria and Queensland:

Granny Flat

• Build cost: $150,000 (average mid-range build).
  
• Rent: $400/week ($20,800 per year).
  
• Gross yield: ~13.8%.
  
• Pros: Affordable entry point, quick payback (7–10 years), adds value to property.
  
• Cons: Landlord still shares the block, some councils restrict rentals (especially in Victoria).
  

Duplex

• Build cost: $600,000 (mid-range build).
  
• Rent: $600/week per side = $62,400 per year.
  
• Gross yield: ~10.4%.
  
• Pros: Two separate incomes, potential for subdivision/sale, appeals to families.
  
• Cons: Higher upfront capital, longer build time, bigger finance requirements.
  

While granny flats offer higher percentage yields, duplexes can create larger absolute returns and stronger long-term capital growth.

Which Suits Different Investors?

The choice often comes down to your budget, land, and goals.

• Granny flats are ideal for homeowners with existing land who want a cost-effective rental income boost without selling or taking on huge debt. They’re also appealing for retirees looking to supplement superannuation.
  
• Duplexes suit investors with larger budgets who want scalability, capital gains, and flexibility to sell or hold long-term. They’re a popular option for developers or those with equity to leverage.

Location Considerations

Rental demand isn’t uniform across Victoria and Queensland.

• Victoria: Inner and middle suburbs of Melbourne are seeing high demand for small, affordable rentals (perfect for granny flats). Regional hubs like Geelong and Ballarat also show strong uptake.
  
• Queensland: Brisbane’s outer suburbs, the Gold Coast, and the Sunshine Coast are hot spots for both granny flats and duplexes. Population growth and infrastructure investment are fuelling sustained rental demand.
  

Tip: Always check zoning overlays, council approvals, and infrastructure projects before deciding.

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Risks to Keep in Mind

No investment is risk-free. Here’s what to watch out for:

• Regulatory changes: Especially in Victoria, where granny flat use for rentals remains under debate.
  
• Vacancy risk: Duplexes may sit empty longer in slower rental markets due to higher weekly rent.
  
• Financing: Banks may value granny flats differently, sometimes not recognising full rental potential.
  
• Maintenance: More tenants mean more wear and tear. Factor in upkeep.
  

So, Which Is Better?

If you’re chasing high yields with low entry costs, granny flats are hard to beat especially in Queensland, where renting them out is straightforward.

If you’re thinking long-term capital growth, equity, and flexibility, duplexes take the lead. They can be split, sold, or held, making them powerful wealth-building tools.

In reality, it’s less about which is universally “better” and more about which is better for you your budget, risk tolerance, and long-term goals.

Going the Granny Flat Route? We Can Help

Australia’s housing market isn’t cooling anytime soon. For investors in Victoria and Queensland, both granny flats and duplexes represent smart strategies to increase returns and create long-term value. The key is matching the option to your financial position and future goals.

If you want quicker cash flow and affordability, a granny flat makes sense. If you want a bigger project with more capital upside, a duplex could be your winner.

At Superior Granny Flats, we specialise in designing and building high-quality granny flats that not only fit your property but also maximise your rental returns. Whether you’re in Victoria or Queensland, our team can guide you through council approvals, design, and construction so you can start earning sooner.

Get in touch with us today to discuss how a granny flat can work for your property and financial goals.