Investing in a Duplex or Dual Occupancy is a simple investment strategy for high rental returns (yield) on your investment, with the opportunity of rapid capital gains for some investors.
What is the difference between the Dual Occupancy & Duplex Investing?
Investing in Dual Occupancy
What is Dual Occupancy
Dual Occupancy is a residential property where two homes occupy one lot of land. Dual occupancy designs can be attached or detached. They are under one title. Dual occupancy homes cannot be subdivided or sold individually. The lot size required can be smaller than the lot size required for a duplex.
The lot may have an attached or detached granny flat (dual key) on the property that may be used to accommodate family or used to generate rental income from a tenant on the property. Seek tax advice if you intend to build a granny flat for rental income, on a property that you live in, as this may change the tax status of your home.
It now generates an investment income so you may lose your capital gains tax exemption. These plans can usually be approved by a local certifier.
Investing in Duplexes
What is Duplexes
A duplex is a residential property that has two purpose built homes under the one roof that are completely separate residences with a soundproof, fire rated dividing wall down the middle of the property. The floor plans are usually identical, mirror images of each other with separate entrances. They can be single or double story. Local councils will set a minimum lot size and they will require a wider street frontage. Duplexes can be kept under one title or be strata titled and sold individually. Thus they are more flexible, having the advantage of choice – renting both; living in one and renting the other; or selling both.
This allows the investor more choice – extra income for paying down the mortgage or covering extra expenses. Selling may, however, trigger capital gains tax and GST implications with the ATO.
Costs with duplexes are usually higher than duel occupancy dwellings with fees including town planning, council application fees, surveying, services connections, council contribution fees, and water and sewer infrastructure fees. They also require a larger land size to dual occupancy.
So the key difference is land title flexibility.
An investor usually has two options: use one of the standard plans that a project home builder has designed already and fits on your land, or have a custom set of plans drawn up by an architect or draftsman for your land. Sometimes, due to size and irregular shape of a lot, a standard project home simply won’t fit, forcing the investor to have custom plans drawn up.
Projectbuilders prefer not to build to custom plans as the exact costs to construct are unknown until the initial build is completed. The chance for them to cost incorrectly is high. Employing an architect can become a very expensive option (I have been quoted 10 times more than a draftsman) and will typically mean a custom builder will be needed for the construction.
There are many project home builders who construct duplexes such as Clarendon, Metricon, Masterton, Hudson Homes as well as a range of wholesale builders who we, at Investn work with. They specialise in solutions for investors with fixed price contracts that are turn key, meaning 100% completed by the builder (landscaping, driveways, floor coverings, blinds etc) ready for a tenant to occupy the property.
The costs to construct a duplex dwelling can vary dramatically between builders. An investor needs to ensure that they compare like for like: for example, compare the specification differences of stone benchtops, cupboards, air-conditioning, landscaping, ceiling heights, flooring, appliances, lights, window coverings, engineering, retaining walls. Are items outside of the construction included in the contract, such as town planning, council application fees, strata titling, surveying?
The construction cost per square metre can vary massively between large project builders and custom builders mainly due to scale and control over labour costs.
Duplexes For Sale
We at Investn can source turnkey investment duplexes across NSW, VIC and QLD. These are usually in the form of split contract house and packages where the investors save money on costs such as stamp duty, which is only payable on the value of the land.
How Investn Can Help You
We can source the land and fixed price construction tenders from our approved wholesale duplex builders and dual occupancy builders who we work with. Our wholesale builders do not have a retail presence, display homes or market directly to the public.
If you do require custom plans, we have drafts people who can draw up custom designs of duplexes and dual occupancy dwellings at an extremely reasonable cost and can assist with applications for town planning approvals that may be needed. Each Australian State and council have differing regulations.
I have personally gone through the duplex process several times with Duplex Builders in Brisbane and have seen firsthand how tenders can vary more than $100,000 for the same duplex construction.
We have seen some investors generate instant equity of up to $100k from investing this way with our guidance.
Let us know if you require help sourcing construction tenders/quotes from duplex builders or dual occupancy builders on land you either own or if you prefer us to source both the land and construction tenders/ quotes.