First-time property investors are increasingly targeting homes with secondary dwellings, such as granny flats or self-contained studios, to boost rental returns and offset higher mortgage costs.

In suburbs across Western Sydney, South-East Queensland and parts of Perth, dual-occupancy properties are selling at a premium as investors look for flexible income streams. These setups allow buyers to live in one dwelling while renting the other, or to lease both for stronger cash flow.

Real estate agents say rising interest rates have made yield a bigger focus for entry-level investors.

Ray White’s Jessica Lam said demand for dual-occupancy stock had grown sharply.
“A house with a granny flat can deliver two rental incomes, which makes servicing the loan much easier, especially in today’s higher-rate environment,” she said.

Some state governments have relaxed planning rules to encourage secondary dwellings, further fuelling supply. For tenants, such arrangements can provide more affordable rental options in areas where vacancy rates remain near record lows.

Property advisors caution, however, that location and design remain critical to long-term performance. Well-planned dual-occupancy homes with separate entries and functional layouts tend to attract higher rents and better capital growth.