Introduction
• Positive Real Estate (PRE) has a long standing relationship with REI
• PRE has now formed a strategic partnership with REI combining its extensive property strategy and acquisition experience with REI’s leading research and analysis capabilities
The next 45 minutes
• What is a dual occupancy (duplex)?• Town planning
• Finance overview
• Strata overview
• Duplex Strategy• Pros and Cons
• Market timing – when to buy
• Best areas to buy in
• Duplex Properties Overview
What is a dual occupancy (duplex)?
Purpose built two dwellings on one property to be subdivided on completion of construction
What is a dual occupancy (duplex)?
Town Planning
• Zoning (Res B, R3 Medium Density)
• Development Application (DA) lodged with Council
• DA Code Assessable• 3-4 month process
depending on Council
Duplex Strategy
• Price point $550,000 +
• Advanced strategy for a client who has already done a dual living or house and land
• Strong yields and cashflow
• Flexibility of 2 properties in 1
• Manufactured equity
H&L Dual Living Duplex
Price $400,000 $460,000 $600,000
LVR 95% 90% 80%
Deposit $20,000 $46,000 $120,000
Rent pw $420 $600 $660
Rental Yield 5.5% 6.8% 5.7%
Potential Equity
$60,000
Approval time 7-9 weeks 7-9 weeks 12 weeks
Area Capital CityMajor Regional
Capital CityMajor RegionalNSW
Major Regional orRegional
Duplex Strategy - Comparison
Duplex Strategy - Type of Investor
H&L Dual Living Duplex
- Low deposit looking to get into a deal
- Looking for med to long term capital gain
- First land and construction deal
- Low income with minimal serviceability
- First home buyer to rent out secondary dwelling to an investor
- Negative geared property portfolio
- High income looking for equity not cashflow
- Turbo charge portfolio with 2 strata titled properties
- High income needing deductions
- High borrowing capacity- High deposit required up to
20%- More experienced property
investor who has done a land and construction deal
- Looking to recycle deposit and move onto another deal on completion
Duplex SWOTStrengths•High land content compared to units•High cashflow•Multiple income streams - less vacancy risk•Stamp duty on land only (1)•High LVR lending in category 1 areas•Median pricing more stable than units in market downturn•Create development equity during construction
Opportunities• Buy from developer in bulk –
discount (5)• Land developers increase land
prices in subsequent stages (6)• Purchase in an estate with high
owner occupier ratio• Purchase infill sites close to city
centre (7)• Having access to wholesale build
terms to maximise equity gain (5)• Strata title allows individual sale
of units• Refinance equity out upon
completion
Weakness• Longer approval timeframe for DA• Client needs to pay interest b/w land
settlement and tenant moving in• Higher price point• Body corporate fees once strata titled• Limited duplex lots available in new
estates• Finance from 80% LVR up to 90% LVR• Specialised valuation and funding
Threats• Urban sprawl estates – over supply• Investor estates• ‘Cowboy’ retail builders resulting in
bad client experience• Council infrastructure charges reduce
profitability
Strata title process - Duplex
• PRE duplex packages include cost of obtaining strata title• Building Format Plan (BFP)
• Community Management Statement (CMS)
• Headworks Charges
• The BFP and CMS are lodged with council along with the final occupancy certificate on completion of the duplex
• Council releases approved stamped plans and documents
• Builder lodges documents with titles office
Duplex Finance
• Duplex finance is specialised
• Finance broker needs to know what type of valuation to order and which funder to use
• Valuation can be done in-one-line or strata titled
• Example in Toowoomba for 5 bed duplex (3 bed + 2 bed)• In-one-line valuation $480,000
• Strata title valuation $600,000
• Most lenders will lend 80-90% on in-one-line valuation only
Duplex Finance Example 1
Construct and refinance
• Borrow 80% LVR of package price $550,000 = $440,000
• Deposit $110,000
• Refinance on completion at 90% LVR assuming 10% uplift in value = 90% x $605,000 = $544,500
• Release $544,500 less $440,000 = $104,500 of equity!
Duplex Finance Example 2
Construct and sell 1 of 2 then refinance
• Borrow 80% LVR of package price $550,000 = $440,000
• Deposit $110,000
• Sell 1 duplex on completion for $302,500 less 3% selling costs leaves debt of $146,575
• Refinance on completion at 90% LVR assuming 10% uplift in value = 90% x $302,500 = $272,250
• Release $272,250 less $146,575 = $125,675 of equity!
Duplex – Where and When to Buy
Where to Buy
• Regional versus capital city areas
• Affordability
• Strata title comparable sales
Duplex Examples
• All of these duplex examples have between a 10% - 25% potential uplift in equity based on either an agent’s market appraisals or registered mortgage valuation
• Duplexes can be completed in well under 12 months for registered land
Duplex Example 1 – Toowoomba QLD
Attached 2 x 3 bed, 2 bath single garage
Land: $210,000
Build: $395,000
Total: $605,000
Market Rent: Appraised at $660pw
3 bed ($330pw) per side
Gross Yield: 5.7%
Market Value Appraised at $670,000
Total dwelling size 264m2 or approx 132m2 per side
Land registers July 2015
Duplex Example 2 – Tamworth NSW
Attached 2 x 3 bed, 2 bath single garage
Land 927m2Land: From $126,500
Build: From $430,000
Total: From $556,500
Market Rent: Appraised at $660-700pw
Gross Yield: 6.2%
Valuation of $610,000
Total dwelling size 271m2 or approx 135m2 per side
Land Registers July 2015
Duplex Example 3 – Gunnedah NSW
Attached 2 x 3 bed, 2 bath single garage
Land: From $135,000Build: From $471,100
Total: From $606,100
Market Rent: Appraised at $700pw
Gross Yield: 6.0%
Market Value Appraised at $670,000
Total dwelling size 275m2 or approx 137m2 per side
Registered Land
Duplex Example 4 – Armidale NSW
Attached 2 x 3 bed, 2 bath single garage
Land: From $155,000
Build: From $446,600
Total: From $601,600
Market Rent: Appraised at $760pw
Gross Yield: 6.6%
Valuation at $750,000
Total dwelling size 284m2 or
approximately 142m2 per side
Registered Land
‘Wholesale’ Builders
• 3-5 builders to cover key areas Australia wide
• Have proven themselves to be reliable, quality builders
• Standard pre-negotiated build contract terms
• Have proven in-house construction management system
• Building Contract standard for H&L, dual living and duplex
• 16 weeks, 18 weeks and 20 weeks
• Liquidated damages
• Fixed price
• Turnkey
Wholesale Advantage
Retail Wholesale
Build Period (House)
26 weeks 16 weeks
Build Period (Duplex)
32 weeks 20 weeks
Liquidated Damages
$20 per day = appraised rent
Builder variations Often None
Turnkey Rarely Yes
Build Commencement
6-12 months 3-4 months
Contracts Mgt No Yes
Construction Mgt Sometimes Yes
Handovers.com Sometimes Yes
Next Step…
Submit your details now by using the link below to find out:
• Detailed information on each of the duplex projects
• Next steps if you are considering securing one of these opportunities
• How to make sure this strategy suits your personal situation
It's true there are big chunks of money to be made in real estate at the moment... but if you're not in the market right now, you will miss out on great opportunities like these.
http://www.positiverealestate.com.au/duplex