Why would you?
There are numerous benefits to duplex development. Some investors see duplex developments as a sophisticated way to build growth into a property that might otherwise take years to produce any decent capital.
Often, on completion of the build, there’ll be sufficient equity in a duplex or triplex development to leverage immediately for the potential acquisition of another property asset.
And let’s not forget that you end up with two or three properties from which to draw a rental income; further consolidating your cash flow and making yourself a more attractive prospect for lenders into the future. For the same cost as a single piece of land.
While the average three-bedroom home in the inner suburbs might rent for say $650 to $700 per week, a three-bedroom duplex in the same area could see each dwelling tenanted for $550 to $600 per week. That’s a combined income of $1,100 to $1,200 per week. Pretty compelling figures.
Let’s talk numbers
While duplex developments are relatively simple undertakings, compared to larger construction projects, there are still a number of important considerations when it comes to financing these investments.
Obviously lenders see any type of development as potentially carrying greater risk, than your standard purpose-built “box on a block” financing arrangement. But that’s not to say obtaining finance for construction of a duplex or triplex has to be overly complicated.
Here are five insider facts that might assist you to make a decision one way or the other, if you’re at all on the fence about duplex development.
#1
Some financiers will suggest you require at least 30% of the value of the property as a deposit because a duplex is seen as ‘higher risk’ by the banks. However, here at Dual Keys, we’ve had great success in securing normal residential loans with a standard 80% LVR and interest-only repayments, for clients going down the duplex path.
#2
Both rental incomes that will be generated by the property on completion, are taken into consideration for debt servicing requirements.
#3
Most lenders are becoming increasingly familiar and comfortable with the construction of a duplex for investment purposes.
#4
Lenders can value property on a “to be erected” basis, however, be aware that comparable sales can be tricky to come by. Hence, you need to be prepared for a more ‘realistic’ valuation price than you might otherwise anticipate.
#5
Your builder can include subdivision costs in the building contract, so make sure you speak to them about this upfront.
Finally, many would-be duplex developers are under the impression that these dwellings must be adjoining, however, this is not actually the case.
Two separate houses on a large block can also qualify as a duplex, for financing purposes. And in fact, some lenders will happily allow you to construct three houses on one block, under normal residential lending parameters.
If you are looking for dual key property in Sydney do not hesitate to call Dual Keys today!
source: trilogyfunding.com.au
