A dual occupancy can be a fantastic part of a property investment strategy as they offer a high yield and potential uplift to a portfolio. As with any investment it is important to understand how it fits in to your overall investment portfolio and strategy. It is important to seek the advice of a professional to establish an overall investment strategy and to ensure that a property investment will form part of this strategy prior to purchase. The strategy should be based around meeting the goals and aspirations of the investor but take into account carefully the investors risk profile.
There are many different investment strategies that investors can undertake from quite simple strategies such as buy and hold, negative gearing, positive gearing and positive cash-flow through to far more complicated development and uplift strategies. As a basic example if an investor is using a strategy of a negatively geared property portfolio; a positively geared dual occupancy property most likely won’t fit in with the investor’s approach.
Generally a dual occupancy property can produce a positively geared or positive cash-flow, depending on the interest rates at the time; even when a very low deposit and high Loan to Value Ratio is used. This is one of the reasons that they are proving to be such a popular investment. For a long time it was thought that to get an investment property with a yield as high as what is achieved through a dual occupancy, you would have to invest in a regional area, which has an additional set of risk factors. Now it’s possible to invest in a good suburb with great Capital Growth prospects and achieve a high yield along the way.
As mentioned above, dual occupancy properties produce a high yield which means that they can be positively geared which would mean that they don’t attract the taxation advantages of a negatively geared property. However, when purchasing a new property there are high amounts of depreciation available especially with a dual occupancy which has higher fixtures and fittings. This deprecation can be used to reduce the taxation payable. In some instances it is possible to have a positively geared dual occupancy, but using the depreciation it can be negatively geared on paper and thus produce a positive cash-flow with the taxation benefits available. A strategy such as this is best discussed with a professional such as a property investment advisor, financial planner or accountant.
Many investors will speak of either a cash-flow or Capital Growth strategy. However, with a dual occupancy property cash-flow and Capital Growth don’t have to be mutually exclusive as there are dual occupancy investment properties available in suburbs which have great Capital Growth prospects.
As is mentioned above there are many different investment property strategies which an investor can follow and a dual occupancy property can form part of most of them. However it is very important that the strategy is decided on first and prior to the purchase of property.