What’s the Big Deal?
You’ve probably heard the terms duplex or dual key being thrown around in regards to investment opportunities. So, what’s the big deal? What is a duplex, what is a dual key, and why should you invest in one?
What is a Duplex Property?
A duplex is a single residential building containing two homes built on a single block of land. The two halves usually are mirror images of each other, share a dividing wall, and have independent entrances. The two homes are under the same roof, but still count as separate entities. The could have separate titles after subdivision, or share a common land title. Building insurance must be agreed upon by owners to cover both sides of a duplex.
You can own one half of a duplex if the properties have been subdivided and placed on two different titles. Duplex living is similar to apartment living with a shared wall, but has only one adjoining neighbour, instead of many as there are in an apartment block.
What is a Dual Key Property?
A dual key property is similar to a duplex, in that it is two individual dwellings under one roof. However, a dual key property has two homes of different sizes. This is often 3-4 bedrooms on one side, and 1-2 on the other. This configuration is comparable to the granny flat of the past.
The other main difference between a dual key and duplex is that a dual key property cannot be separately titled, or strata titled. This means there are no Body Corp Fees, and only one set of council charges.
Who Wants to Live in a Dual Key or Duplex?
Affordability is a large drawcard for duplex residents. When compared to a stand-alone house of the same number of bedrooms, the overall living costs for the tenant can end up significantly cheaper. They are also more detached than regular apartments, appealing to those who prefer additional privacy.
On the other hand, many people appreciate the added security of having close neighbours. A duplex or dual key can provide the comfort of having someone else nearby, without the multitudes of adjoining neighbours as in apartment blocks.
In addition, a dual key may appeal to families with young adult children who don’t necessarily want to leave the nest, but still need some additional privacy. Alternatively, families who need to care for an elderly relative will find a dual key the most convenient.
Why Buy a Dual Key or Duplex Property?
The number one reason to invest in a duplex or dual key property is the additional rental yield. Both options require two separate tenants, two separate leases, and therefore provide two separate streams of income. This is a definite bonus which is made even sweeter if both dwellings are on the same title, as your expenses will be cheaper than if you owned two separate properties.
When compared to buying one regular, free-standing home, the other benefits are clear:
Advantages of Buying a Duplex or Dual Key Property
Affordability
Depending on the market, it can be much more affordable to buy a duplex than two stand-alone homes. You will also save on maintenance fees for the two properties, as the yard space, fences and other aspects are the same as in just one stand-alone property.
Portfolio Growth
Because a duplex or dual key property is technically two properties, buying one will increase your portfolio and rental yield faster.
Low Vacancy Risk
Due to the multiple tenants/leases, it is very unlikely to have both property vacated at the same time. Because of this, even between tenants, you will still be receiving some amount of rental yield.
Property Management
When compared to owning two stand-alone properties, a dual-key or duplex is the easiest and most cost-effective to manage. No travel time is wasted between visits.
Emergency Accommodation
Should the need arise, you can always live in one half of the property, while still renting out the other side for continued rental yield.
Disadvantages of Buying a Duplex or Dual Key Property
Supply
Investing in duplexes or dual key properties can be an awesome strategy. However, they are often in areas where there is already an oversupply of rental properties. This oversupply can push rental yields down, ultimately attracting the wrong type of tenant. No one wants to invest in a “rental ghetto”.
Property Spruikers
Unscrupulous property “advisors” have been known to spruik duplexes or dual key properties as a get rich quick scheme, which is simply untrue. The same time, thought and research must be put into one of these types of properties as a free-standing home. Be sure to remember that no property is guaranteed to do well, and anyone claiming otherwise is trying to pull the wool over your eyes. Be sure to consult with a Qualified Property Investment Advisor to ensure you are receiving the best, most thoroughly research advice possible.
Tenant Turnover
Attached homes including apartments, duplexes and dual key properties often have faster tenant turnover rates than standard family homes.
Exit Strategy
The duplex or dual key property is more likely to only appeal to another investor should you decide to sell the property. The family home, however, will appeal to investors and owner-occupiers alike.
Higher Insurance Costs
The landlord insurance is likely to be more expensive to purchase than on a standard family home. It’s important to speak with your financial team to understand any effects on overall cost.
Final Verdict on Duplexes and Dual Keys
Overall, if you’re looking to buy an investment property, it could be a benefit to your investment plan to invest in a duplex or dual key. Both types of property are increasing in popularity and are likely to continue to be in demand for a long time coming.
However, there are all kinds of residential property you could invest in. Thus, as with any property investment, it is important to consider how it will align with your goals and property investment plan.
We recommend speaking to a professional to ensure your investment will provide the best return for you, the investor.
If you’d like to speak to our Qualified Property Investment Advisors about your next investment, give us a call on 1300 660 335 or email hello@prospaproperty.com.au to get in contact.
