Building a granny flat to rent out in Victoria

In Victoria, anyone can live in or rent a small second dwelling, including family members or unrelated people, and residential tenancy requirements apply. It cannot be subdivided or sold separately from the main home. This guide is for Victorian homeowners planning a granny flat to rent out: the rules, the rental standards to design for, and where to get financial advice.

Key facts

Who can live there: anyone, including family members or unrelated people. Residential tenancy requirements apply, such as room sizes, facilities and smoke alarms. (Victorian Government)

Ownership: a small second dwelling cannot be subdivided or sold separately from the main home. (Victorian Government)

Minimum standards: rental properties must meet minimum standards in 15 categories, and from 25 November 2025 must meet them before the property is advertised. (Consumer Affairs Victoria)

Energy efficiency: new minimum rental standards for energy efficiency take effect from 1 March 2027. (Consumer Affairs Victoria)

Sources: Victorian Government, “Small second dwellings” (planning.vic.gov.au); Consumer Affairs Victoria, “Rental properties – minimum standards” (consumer.vic.gov.au). Both checked 8 October 2026.

Can you rent out a granny flat in Victoria?

Yes. Anyone can live in or rent a small second dwelling, including family members or unrelated people. Once it’s rented, residential tenancy requirements apply, covering matters such as room sizes, facilities and smoke alarms.

The home must also meet Victoria’s rental minimum standards, set out below. For the planning rules that apply to the build itself, see our guide to small second dwellings in Victoria.

Sources: Victorian Government, “Small second dwellings”; Consumer Affairs Victoria, “Rental properties – minimum standards”. Both checked 8 October 2026.

Which rental standards should you design for from the start?

Victorian rental properties must meet minimum standards in 15 categories, set out in Schedule 4 of the Residential Tenancies Regulations 2021. From 25 November 2025, a property must meet them before it is advertised, and before the renter moves in. Designing for them from the start means you don’t have to retrofit a new home before you can advertise it.

These are the standards that most affect a new granny flat’s design:

Standard	What it requires	How to design for it
Bathroom	A washbasin and a shower or bath, with hot and cold water. Shower heads need a 3-star water efficiency rating, or 1–2 star where 3-star can’t be installed.	Specify a 3-star shower head.
Heating	A fixed heater in good working order in the main living area. For agreements from 29 March 2023 it must be energy efficient: for example, a non-ducted air conditioner or heat pump rated 2 stars or above, or ducted or hydronic heating with an outlet in the main living area.	Plan a fixed, energy-efficient heater in the living area.
Electrical safety	Since 29 March 2023, a modern switchboard with circuit breakers and electrical safety switches (RCDs). Older fuse boards may need replacing entirely.	Specify a modern switchboard with circuit breakers and safety switches.
Kitchen and laundry	A food preparation area, a working sink with hot and cold water, and a stovetop with two or more burners. Any laundry needs hot and cold water.	Choose a cooktop with at least two burners that doesn’t need mains gas: a small second dwelling must not be connected to reticulated natural gas.
Structure, mould and ventilation	Structurally sound and weatherproof, and free from mould and damp caused by or related to the building structure. All habitable rooms, including the bathroom, toilet and laundry, need adequate ventilation that meets the Building Code of Australia.	Detail ventilation and weatherproofing in the design, rather than fixing damp later.
Locks and windows	Functioning deadlocks on external entry doors (with listed exceptions) and functioning latches on openable external windows.	Include deadlocks and window latches in the door and window schedule.
Bins and window coverings	Rubbish and recycling bins supplied. From 1 December 2025, internal window coverings need secured cords.	Allow space for bins, and choose blinds with secured cords.

Sources: Consumer Affairs Victoria, “Rental properties – minimum standards”; Victorian Government, “Small second dwellings”. Both checked 8 October 2026. The full list of categories is on the CAV website.

What changes on 1 March 2027?

New minimum rental standards for energy efficiency take effect from 1 March 2027. Consumer Affairs Victoria publishes the details, so check its current requirements before you finalise your specification.

Source: Consumer Affairs Victoria, “Rental properties – minimum standards”, checked 8 October 2026.

Finance, tax and ownership: get your own advice

Any rent or return figures are potential only, and depend on the location, the design and the market. Always seek advice from a qualified professional in the right field, such as financial, lending or tax, before you commit.

One point to raise with your advisers: a small second dwelling cannot be subdivided or sold separately from the main home, so it stays part of your property and is sold with it. Before you commit:

speak with a licensed finance broker about how you’ll fund the build;
speak with your accountant about how building the granny flat, and renting it out, affect your tax;
check your obligations as a landlord with Consumer Affairs Victoria before you advertise.

Source: Victorian Government, “Small second dwellings”, checked 8 October 2026.

How Dwellix helps

We build two-bedroom granny flats in Melbourne, Geelong, Ballarat and Bendigo. For a granny flat you plan to rent, that means:

checking your block against the rules in a feasibility review before you choose a design;
choosing from three designs, each with two bedrooms and one bathroom;
listing what each package includes. For example, every package includes a split-system air conditioner in the living area (see our specifications). Before you advertise the home for rent, check it against Victoria’s rental minimum standards, including the heating standard;
handling the building permit process for you: you formally appoint the building surveyor, and we can recommend one and manage everything with them;
setting out the price, inclusions and exclusions in writing: see granny flat cost.

Renovating an existing rental instead? See investment property renovations.

Frequently asked questions

Is a granny flat a good investment?

It depends on your finances, your property and your plans, so it’s a question for your accountant and a licensed finance broker. Any rent or return figures are potential only, and depend on the location, the design and the market, so always seek advice from a qualified professional before you commit. What we can do is design and build granny flats with Victoria’s rental minimum standards in mind. Check the current standards with Consumer Affairs Victoria.

Granny flat or investment property: what’s the difference?

A small second dwelling cannot be subdivided or sold separately from your main home, so it is sold with your property. A separately titled investment property can be sold on its own. Which suits you depends on your finances and plans, so get advice from your accountant and a licensed finance broker.

Do the rental minimum standards apply to a new granny flat?

Yes, if you rent it out. Victorian rental properties must meet minimum standards in 15 categories, including the bathroom, heating, electrical safety, kitchen, ventilation, locks and window latches. From 25 November 2025 they must be met before the property is advertised. New energy-efficiency standards take effect from 1 March 2027.

Can I lease a granny flat in Melbourne to someone who isn’t family?

Yes. Anyone can live in or rent a small second dwelling in Victoria, including unrelated people. The same residential tenancy requirements and rental minimum standards apply whoever the renter is.

Check your block

Start a feasibility check to see which design fits your block. Prefer email? Write to sales@dwellix.com.au.

General information only, not financial or tax advice, checked 8 October 2026. Rules change; confirm requirements for your property with your building surveyor or council.