Hi all
Wondering how much of a vote second dwelling properties will get from investors?
Pros:
Second source of incoming
As long as property is not completely vacant, you’d get about half of the rental income.Cons:
Seems to have a smaller buyer pool——————-
Questions I have would be:
1. How hard is it to have 2 different tenants to occupy both? I mean while it sounds good on paper that it is one property with 2 sources of incoming, but how frequently do both “sides” get occupied? Or frequently only 1 side of gets occupied while the other side is vacant?
2. Do they increase in value at a much slower pace than a normal house/townhouse? While it may be harder to “sell” them due t a smaller buyer pool, but do they increase in value at a much smaller scale too? Reason for asking is obviously, with property investing, we want equities to expand portfolios, but if the property doesn’t increase in value, then it is not possible to withdraw equity and that is not very useful.
1. mate do you mean a duplex? either way, it comes down to price for the tenant and what you offer against whats out there and their options, do a SQM report on the suburb first
2. clearly work out what your talking about, do you mean granny flat? subdivision, duplex etc????
also if you can build more it adds value and usually makes you money. (as a very general rule)
Jaxon | Jaxon Avery – Financial Adviser
http://www.jpafinancialservices.com.au
Email Me | Phone MeJPA Financial Services Pty Ltd
Hi Jaxon
In this instance, I am talking about a single property with a wall in the middle, effectively dividing the property into two.
For example, a 4 bedroom, 3 bathroom and 2 garage house, with a wall in the middle. At left hand side of the wall is 3 bedrooms, 2 bathrooms and 1 garage while there is also 1 bedroom, 1 bathroom and 1 garage at the other side of the wall.
I have been asking the same question to my local real estate agents, and most of them shake their heads when I draw a floor plan for them. They all believe most people would much prefer to buy a “normal single dwelling house” rather than a “dual occupancy” house. They all believe that while Dual occupancy house may be good for rental incomes, but they increase capital growth at a much slower pace than a normal single dwelling house.
But I would like the opinion of mature investors to confirm, are dual occupancy really bad for capital growth compare to normal houses?
they increase capital growth at a much slower pace than a normal single dwelling house.
Hi Steven.
I wouldn’t necessarily agree with that view, as the majority of the value of any property is in the land, not the dwelling. So in part, it comes down to the demand for land in the particular area. That said, your dwelling does narrow your target market for resale, so with a duplex, you’re aiming to sell to…
1. an investor
2. an owner-occupier who wants an aging family member nearby
3. a first homebuyer (or anyone for that matter) who wants a creative way to pay off their mortgage faster (by renting out the other side, assuming it’s legal in that state).Given the smaller target market, you could conclude that you are carrying greater resale risk (in lower demand areas or if the market turns against you), but that’s not necessarily uncommon when getting a higher rental return. As Jaxon inferred, you need to first work out whether you are a growth or income investor.
Hope that helps.
JasonJason Staggers | JasonStaggers.com
http://jasonstaggers.com
Email MeHi Jason
I am trying understand that term actually.
For example, let’s say a normal single dwelling house in an area on average sells for 500k, then does that mean:
1. Dual Occupancy house in that same area automatically sells for less than 500k due to smaller buyer pool on the basis of less buyers = less competition = lower selling price?
2. Or do they still get sold at 500K as well in that area, but only they take longer to sell due they attract specific buyers rather than “general public”, but those specific buyers still see the values in them?
That depends on the area. If demand overall is relatively strong, #2, although it wouldn’t necessarily take longer to sell. If demand is weaker, #1, or it takes longer. So the risk is, if the market moves against you, your duplex may be harder to sell for the price you want within the timeframe you want because the target market is smaller. In the meantime though, you would be getting a higher yield.
Duplexes tend to make better income properties than growth properties (unless in an area where land is appreciating at a rapid rate), but that said, a mate of mine built a duplex in Albury two years ago on a corner block and just sold it for about $100k over his purchase price. He was very smart with his design with the attached granny flat facing the side street. An investor from Sydney bought it and was happy with a 5.7% yield.
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This reply was modified 7 years, 3 months ago by
Jason Staggers.
Jason Staggers | JasonStaggers.com
http://jasonstaggers.com
Email MeJason hit so many nails on the head, I hope you see the value in his comments,
I would also like to address why your asking this question and how I would act in any market condition etc.
what is going to get me the most return (ROI)?
what is going to get me hopefully the largest captial growth possible?so if I have a block and I am deciding do I build a house or duplex, lets say under town planning both are acceptable under the zoning for a 600m block.
4b house lets say are 700k
3b duplexs are 450k (each)now the build and legislative are the costs
house – 200k + 35k council fees
duplex – 270k + 70k council fees= 700k – 235 = 465k for land and every other fee
= 900k – 340k = 560k for land and every other feenow this example would mean I make $95,000 or 95k more on the duplex build.
also the rental yeild for the duplex is very likely more
as say a house rents $650
each duplex rents $380 (2) = $740, so you can see if done right a duplex will normally outperform the rental return (most times, not always)but Jason also raised a good point, the land is the value, but also the cost to build and buyer demand is another factor to weigh up.
I hope this sheds a deeper light for you?
Jaxon | Jaxon Avery – Financial Adviser
http://www.jpafinancialservices.com.au
Email Me | Phone MeJPA Financial Services Pty Ltd
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This reply was modified 7 years, 3 months ago by
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