Why Invest In A Duplex Property?
In the world of property there are always options available to you. Investing in a traditional established property or a new house and land package has its benefits. A well-researched property will provide you with a good investment if your plan is to reduce debt and rely on capital growth. Nevertheless, sometimes you want something different? A duplex provides this opportunity.
What is a duplex? Simply put, a duplex is a property that is built with the intention of subdividing into two dwellings. They are typically built with a complete firewall between the dwellings and at completion hold their own titles.
Now, why would you do this? Here are two reasons:
- Equity increase – When you build a duplex property an increase in equity at the completion and ownership of your titles is likely. For example: Say the price for your land and build is $650,000. The property has 3 bedrooms, 2 baths and 2 garages on both sides. A local agent values the 3,2 and 2 between $375,000 to $400,000 per side upon completion. Using the lower value of $375,000 and multiplying it by the two dwellings gives you a total of $750,000. That’s an equity increase of $100,000 once the build of your investment property is completed. *These numbers are example only.
- Rental benefits – Two dwellings equals two incomes. If you plan is to hold the duplex, you not only receive the equity increase but the rental benefit of having two dwellings. This typically results in your property becoming neutral to positively geared, depending on the area you invest in.
You have created equity, now what? Your rental income goes to work on reducing your overall debt position and this allows you to purchase that next investment faster then a traditional property. Some investors believe doing multiple duplexes with a ‘build and sell’ motto will help them reach their goals faster. This strategy should be approached with caution with one eye fixed on the market. Sometimes reducing your investment debt without selling may be a better option. Each individual’s circumstances are different and seeking professional advice is always recommended.