Recently we have had several purchasers who have opted to purchase a dual occupancy/auxiliary property and live on one side and rent out the other side. As such, I thought I’d go through some of the pros and cons that a potential purchaser looking to do this should be aware of.
Pros:
The first and most significant advantage is that you can receive an income on the home in which you are living, which can provide a substantial boost towards your mortgage. If you decide to move out at any stage, the property will be a fantastic high yielding investment that will significantly boost your portfolio.
This type of property acts as both an investment and a home and is a great way to get a jump start for first-time investors or looking for an intuitive way to provide income from their own home. With the investment right next door, you would be able to keep an eye on things and would also have the security of having a tenant close by.
When you live on one side of the property, you would have the option of renting out the property’s investment side to a relative or family member. This is a great opportunity to have someone you know close by without actually living with them.
These properties offer a great low maintenance way of living and have less land to take care of. Being a brand new property, there is very little maintenance compared with an established property. They still look like a house from the street, have attractive facades, and have the added advantage of not having a body corporate like a Duplex property. With only one set of rates to pay, this also represents a cost-saving.
Cons:
With some of the areas I have highlighted below that need consideration before purchase as a live-in investment, I have not gone into great detail as individual situations will vary and need to be looked at by a professional.
stamp duty implications: There can be stamp duty implications to having a lease on the home part, which may affect any stamp duty discounts available to owner-occupiers or first home buyers. This needs to be assessed by a conveyancer before purchase.
Taxation Implications: An accountant will need to assess and provide specific advice regarding the implications of the Capital Gains Tax assessable against the property, considering the lease of part of it and part as owner-occupied.
Any Negative Gearing benefits would also need to be assessed against the individual’s situation, and the rates bill would need to be split between the two dwellings. Depreciation breakdowns will need to consider the two sides of the property as the only part is investment and part is owner-occupied.
