They say double the dwelling, double the income. But does that stack up as true? Today we’ll take you through one of the increasingly popular investment models that Australians are starting to love.
Dual Occupancy Properties are a unique type, where the block of land holds one title, however two dwellings are constructed on the site. These can be detached or attached. Some examples of a dual occupancy could be;
- Where a property has five bedrooms and three bathrooms however is divided securely so one section of the property has three bedrooms, two bathrooms, the kitchen and living areas. And the other side of the property has two bedrooms, a kitchenette and one bathroom. The two ‘sections’ can live independently of one another, but are under the same roofline.
- A granny flat is constructed, adjoining the property with a studio style accommodation layout and kitchenette and bathroom. Separate living areas, but attached through an extension or just off the original house.
- A property with a sleepout or carport area, that is accessed through the house, but has been renovated to include a kitchenette, bathroom and bedroom/living area.
These types of living arrangements give investors freedom and flexibility while really maximizing potential returns from land values.
They can be used to either live in and rent the dual occupancy out, subsidizing the mortgage. They can be used entirely as an investment with two separate tenants in the same property, generating two income streams (often highly profitable) or they can be ideal for families with older children to give them some separation and independence.
There are benefits to renters too such as no body corporate fees and a more relaxed rent as the landlord only has one set of council rates to pay for both properties.
The income generated with a dual occupancy can be fantastic and really helps investors who are working on a cash flow positive investment strategy. However there is a downside that investors should be aware of.
Because dual occupancy properties are not very common at this stage, they can be difficult when it comes to bank valuations. Valuers value the property on it’s value as a structure and the land. Therefore, while the perceived value to us is quite high (two income streams, two different dwellings), valuers don’t consider this. For example, the five bedroom, three bathroom property we mentioned before, would be valued just as that. Whereas in reality, it is designed as one three bedroom, two bathroom property and another two bedroom, one bathroom property – likely to be of higher value.
Builders often construct new dual occupancy properties as two separate dwellings with different power meters, water meters and hot water systems. This means that more time and resources are required to build them.
Because of this, the disparity between building costs and the valuation can mean a larger deposit or more equity needs to be provided in order to receive financing.
However, if an investor can afford that extra outlay, they’re likely to recoup it over the years of ownership in increased cashflow and we can expect that by the time they sell the property, the real value of dual occupancy properties will be recognized across the market and a sale price that affects this will be achieved.