One of the great things about using duplexes as an investment vehicle is the opportunity for instant equity. By creating the two separate titles you may increase the capital value of the overall property, as the two individual units can be worth more than the cost of the project.
Firstly, let us quickly look at what a Duplex is. A Duplex is a residential building containing two homes. It is built on a single block of land and can be individually titled once construction has been complete. Each dwelling will be individually metred for all utilities such as power, water and phone etc. The key difference between a Duplex and a dual occupancy / auxiliary is the ability to strata title. A dual occupancy / auxiliary generally cannot be strata-titled.
A Duplex can’t just be built on any block of land. There are rules and town planning regulations and these vary across different states and local government areas. In some Council areas Duplex blocks will have minimum size requirements, and or location requirements.
Instant Equity / Capital Growth
In some instances, a Duplex will have the opportunity for instant equity for the investor. As a Duplex can be strata-titled the two halves can be sold off individually. If the Duplex project has been very well sourced and structured, the two halves may be sold for more than the total construction cost. Thus, providing instant equity or Capital Growth. If an investor is looking to build their property portfolio, they may opt to use the equity to purchase further properties.
Do Duplexes Yield Well?
Generally, a Duplex pair will offer a slightly better yield than a standard house in the same area. They will not normally yield quite as well as a dual occupancy / auxiliary property though. Duplexes blocks are often comparably more expensive than a dual occupancy / auxiliary block. Duplexes often also have higher associated fees from Council. There may also be some additional landscaping, driveways, and body corporate fees involved in a Duplex project.
Should I undertake a Duplex project?
A Duplex project can be a great opportunity for you to create equity and uplift. However, it must be well researched and have had an adequate amount of due diligence undertaken.
This due diligence should include at a minimum:
- Town planning assessment for whether a Duplex can be built
- How many bedrooms are allowed each side
- Other town planning constraints.
- Site constraints
- Comparable Rentals, vacancy, demand
- Comparable sales of final product to assess end values
If you would like further information on duplexes or would like to speak with an expert, please send through an inquiry on the link below: