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Two for the price of one. We found a loop hole!

By March 15, 2018 No Comments

For strategies requiring instant equity injection, we source an existing duplex on one title then leverage from the strata titling process.

Adding a Duplex to a client’s portfolio results in two houses, two rents, and two sales. This may sound ‘too good to be true’ and many seasoned investors have read about the complex process of developing a duplex which can take anywhere from 9 months (if you employ an experienced development manager) to 2 years (or more) if you decide to have a go at it alone.

But there is a loophole.

To get all the benefits of owning a duplex (the flexibility to rent one, sell one, rent both, sell both), you do not have to race out and buy a block of land for your development. To avoid the holding costs, and waiting times to receive profits, we have sourced for our clients existing duplex blocks on one title in growth suburbs.

The main benefit of sourcing existing properties is that they are already established and often have long-term tenants already renting.

Recent Case- Study: Existing Duplex.

Our recent clients came to us with a budget of $500,000 and wanted to secure the best deal for their portfolio which included their current investment property (House in Melbourne, not purchased through Aus Property Professionals).

The long-term goal for these clients is to secure a family home around Sydney. To achieve this goal, we need to increase serviceability and inject equity into their portfolio. This strategy will enable them to purchase multiple properties and diversify their portfolio. 

Location:

Given this criteria, an existing Duplex on one title was the perfect complement to their portfolio. With the budget of $500,000, this meant we had to think outside the capital cities and look to regional towns that had good signs for growth, strong education sector, and multiple industries. This narrowed our search to NSW regional areas of Armidale and Tamworth.

When searching for this particular property, our feasibility was important which we ensured to take into consideration all additional costs required for the strata titling process. We were able to locate many duplex and dual income properties however, not all properties are investment quality and many were priced far too high to be able to make strong returns at the end of the deal.

The Deal:

We managed to secure an excellent brick veneer 2 x 2 bedroom duplex on a large 1,221 sqm block in South Tamworth, just 10 minutes drive to the town centre.

We negotiated the purchase price well under budget at $384,000 (down from the asking price of $399,500).

The current rent on this property is $250/week per unit. This provides an excellent yield of 6.8%.

This property was well maintained, with existing BCA approved firewalls, and separately fenced yards at minimum height requirements which has saved our client paying for this during the strata titling process.

The numbers:

This property was very attractive as comparative 2 bedroom duplex units in the area are selling for $250k-$270k so we knew we could get excellent results after the strata process. The property presents very well, and is in a desirable location close to town and close to schools and located at the end of a cul-de-sac street.

The Lowdown on Duplexes:

The reason duplex’s make excellent investment properties is because they provide a lot of flexibility. Because you have two properties, your options are:

• Rent out both units
• Sell both
• Sell one; rent the other
• Sell or rent one; live in the other

Lloyd Edge, Director of Aus Property Professionals, advocates Duplexes for building growth into a portfolio. He says “Duplexes are a sophisticated way of building growth into the property, rather than waiting years to see it. After strata titling, you are able to take some equity out of that property and go and buy another property immediately.”

But be careful, not all Duplexes are created equal. It’s not as easy as just buying any established duplex and seeing the instant wealth. To ensure you are making a wise investment a detailed feasibility should always be carried out which takes into consideration all the costs involved to get the duplex strata titled. It is also imperative that the due diligence completed looks at the area’s zoning, specific council requirements for the area, and the demand for units in the area.

As experts in the field, Aus Property Professionals highly recommends getting an experienced buyers’ agent on your side to ensure you do not over capitalise on the purchase of the duplex. It is important to negotiate on the purchase price as you will make your money when you buy, not when you sell.

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