---
title: "Two Years and It's Already Mouldy — 3 Things Your Granny Flat Builder Won't Tell You"
description: "Cheap granny flat quotes hide material substitutions that cause mould in 2 years. Get the inclusion list, check waterproofing, and pick the right orientation. Real builder costs inside."
author: Joey Don
date: 2025-06-05
category: Renovation & Development
url: https://premiumrea.com.au/blog/granny-flat-builder-tricks-three-checkpoints
tags: ["granny flat", "builder", "construction", "mould", "waterproofing", "inclusion list", "Melbourne", "dual occupancy"]
---

# Two Years and It's Already Mouldy — 3 Things Your Granny Flat Builder Won't Tell You

*By Joey Don, Co-Founder & CEO at PremiumRea — 2025-06-05*

> Someone quoted a client $80K for a granny flat. Sounds great, right? Until I asked for the inclusion list. The external cladding was recycled timber panels. The bathroom had no waterproofing membrane. Two years and that thing would be a petri dish.

This video is for anyone who might build a granny flat in the future. Doesn't matter if it's for investment or for mum to move in — if you don't know these three things, a builder will take you for a ride.

I'm standing inside one of ours right now. We listed it six days ago, ran one open inspection, and already have 19 rental applications sitting in the inbox. That's the demand side taken care of. The supply side — the actual building — is where most people get themselves into trouble.

Someone will quote you $80,000 for a 30-square-metre granny flat and you'll think you've found a bargain. You haven't. At that price, something has been cut. The question is what, and whether it'll cost you $30,000 to fix in two years or just $3,000.

I've been building these things for long enough to know exactly where the corners get cut. Here are the three checkpoints that matter.

## Checkpoint one: demand the inclusion list

Screenshot this term: **Inclusion List**. Write it down. Tattoo it on your forehead if you have to.

An inclusion list is the complete schedule of every material going into your build. It specifies the brand, model, grade, and quantity of everything from the external cladding to the door handles. Without it, you're signing a contract that says 'one granny flat' without defining what that granny flat is actually made of.

Here's what happens when you don't ask for one.

The biggest cost item in a granny flat is the external cladding. A proper build uses fibre cement weatherboard — James Hardie Linea or equivalent. It's fire-rated, moisture-resistant, termite-proof, and lasts decades. Cost for a 30-square-metre unit: roughly $8,000 to $10,000 installed [1].

A builder trying to hit a low quote will substitute this with Colorbond steel sheets (the same material as fencing). Saves about $5,000. Looks okay on day one. But Colorbond on a dwelling has thermal bridging issues in Melbourne's climate — hot in summer, cold in winter, and condensation forms between the wall cavity and the sheet. Within 18 months, you've got moisture trapped in the frame. Within two years, black mould spreading from the floor edges.

Worse still, some operators use recycled timber panels or imported materials that don't meet Australian building standards. Slap some paint on them and you genuinely can't tell the difference on inspection day. But Melbourne's temperature swings — we can hit 38 degrees one day and 14 the next — will destroy substandard materials faster than you'd believe [2].

The base cost of materials and labour for a properly built 30-square-metre granny flat is approximately $90,000 before paperwork. Even if the builder does the job at zero margin — as a personal favour — the minimum cost hitting your hands is close to $100,000 once you add the Building Permit, soil test, and compliance items. Anyone quoting $80,000 or less is substituting materials. No exceptions.

"I tell every client the same thing: get the inclusion list before you sign anything," says Joey Don. "If the builder won't provide one, or if it lists generic descriptions like 'standard cladding' instead of specific products, that quote is worthless. You're buying a surprise, and it won't be a pleasant one."

## Checkpoint two: waterproofing and material longevity

The second place builders cut costs is invisible until it's catastrophic: bathroom waterproofing.

A properly waterproofed bathroom has a multi-layer membrane applied to the floor and walls before tiling. The membrane extends at least 150mm up the walls (1,800mm in the shower zone), with all joints and penetrations sealed. Cost: approximately $3,000 for a standard granny flat bathroom.

Skip it — which plenty of budget builders do — and you save $3,000 on the quote. But water finds its way through grout eventually. Without the membrane, it seeps into the subfloor, the frame, and the cavity. By the time you notice (usually when the floor feels spongy or the skirting boards start swelling), the damage is extensive. Remediation cost: $8,000 to $15,000, plus lost rental income while the unit is uninhabitable.

Here's my approach to materials, and it's not about spending more money. It's about spending smart money.

Flooring: SPC (stone polymer composite). It's essentially waterproof plastic that looks like timber. $62 per square metre installed. It'll look the same in seven years as it does today. A tenant can spill a bucket of water on it and nothing happens. Real timber flooring costs more, needs maintenance, scratches if a tenant drags a chair, and warps if moisture gets underneath [1].

Cabinetry: high-gloss laminate (what some people call baked-paint board). Scratch-resistant, wipe-clean surface. The alternative — standard melamine — chips at the edges within a year of rental use and looks shabby.

Benchtops: engineered stone. Not laminate board. Laminate is $800 cheaper, but it swells at the edges when water sits on it. You'll be replacing it in two years. The stone lasts the life of the building.

Shower design: no shower base (step-up tray). Instead, use a natural fall to the floor waste with tiles laid on a waterproof membrane. This eliminates the biggest source of granny flat water leaks — the junction between the shower base and the floor. It also looks better. We're designing to match standards you'd see in a $1.5 million home, not a builders' basic spec.

Tile the bathroom walls to above the shower head height — minimum 1,800mm. Water splashes above the tap zone. If you tile to only 1,200mm (common in cheap builds), the painted plaster above gets wet every shower, and within a year it's peeling and growing mould [3].

## Checkpoint three: orientation and market fit

This one is less about construction and more about getting the design right for your market. I see people get this wrong constantly.

If you're building for yourself to live in — in Melbourne or Tasmania — orient the living area to face north. Melbourne winters are brutal. A north-facing living room gets six hours of direct sunlight in winter, which keeps the space warm naturally and cuts your heating bill in half. South-facing? You'll be running the heater from April to October.

Sydney and Perth are more flexible — the climate is milder, and north or east orientations both work. Brisbane is actually the opposite: avoid north and west-facing living areas, because the summer heat is intense and you'll be running aircon flat out from November to March.

But if you're building for investment — and most of our clients are — orientation matters less than market fit.

In suburbs with large Middle Eastern and Indian populations, build bigger. These families tend to have multi-generational households, and a larger granny flat (60 square metres, two bedrooms) appeals as a genuine family dwelling rather than a studio. In these areas, a bigger granny flat attracts self-occupying buyers at auction who'll pay a premium for the dual-occupancy configuration.

In affluent suburbs or near train stations, go smaller. A 30-square-metre studio suits professionals who want a private home office, or young singles who value the location and low rent over floor space. Near train stations, the compact size is actually a selling point — it's marketed as a self-contained unit with transit access, competing with share houses and apartment rentals.

Our standard 30-square-metre granny flat costs $110,000 plus GST to build. Expected rent: $340 to $370 per week including bills. At $370 per week, that's $19,240 a year on a $110,000 outlay — an 18% gross return on the construction cost. Typical payback period: five to six years [1].

The 60-square-metre two-bedroom version costs $160,000 plus GST. Rent: $480 to $500 per week. Lower percentage return but higher absolute dollars, and it appeals to a different tenant profile.

Either way, the inclusion list is your insurance policy. The waterproofing is your structural integrity. And the market fit determines whether you get 19 applications on day six, or zero after six weeks.

## References

1. [PremiumRea granny flat pricing schedule. 30sqm: $110K+GST, rent $340-$370/wk. 60sqm: $160K+GST, rent $480-$500/wk. SPC flooring $62/sqm. See pricing_granny_flat.md.](#)
2. [Australian Building Codes Board, National Construction Code 2022, Volume 2 — Residential. External cladding standards for Class 1a buildings.](https://ncc.abcb.gov.au/)
3. [PremiumRea construction specifications. Bathroom waterproofing: multi-layer membrane, tile height 1,800mm in shower zone. See specs_granny_flat.md.](#)
4. [Victorian Building Authority, 'Building Practitioner Registration'. Requirements for domestic builders and building surveyors in Victoria.](https://www.vba.vic.gov.au/)
5. [James Hardie Industries, 'Linea Weatherboard Technical Data Sheet'. Fibre cement cladding specifications for Australian residential construction.](https://www.jameshardie.com.au/products/external-cladding/linea-weatherboard)
6. [PremiumRea granny flat specifications. External cladding: James Hardie Linea. Roofing: Colorbond. Frame: treated pine H2/H3. Windows: aluminium double-glazed. See specs_granny_flat.md.](#)
7. [Consumer Affairs Victoria, 'Minimum Rental Standards for Residential Properties'. Compliance requirements before tenancy commencement.](https://www.consumer.vic.gov.au/housing/renting/standards-and-repairs)
8. [PremiumRea property management. 19 rental applications within 6 days of listing for a completed granny flat in Melbourne's southeast.](#)

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Source: https://premiumrea.com.au/blog/granny-flat-builder-tricks-three-checkpoints
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent