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The pros and cons of buying duplex investments

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• Heads up Subscription services team at Real Estate Investar

• Team of 6 Portfolio Managers

• Supporting 3,000 subscribers

• Manages the Concierge Service

Logan Horstead

• Owns BuilderBuilder

• Over 20 years industry experience

• Focus on investor stock

• Property opportunities that deliver strong financial outcomes

Rick Stapleton

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their property portfolios

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Poll: When are you looking at making your next purchase?

Lets get started

Pros of buying off the plan

• You are buying at today’s prices, not market

value for when construction will be complete

• You only need to put down a deposit to

secure “today’s price’’, it doesn’t matter if the

market value has jumped by settlement time

• You have more time to save, so you may not

need to borrow as much

• New properties can mean less maintenance

costs

Changes in prices

Cons of buying off the plan

• Developments may not go ahead, deal with

reputable business’

• Your financial circumstances can change

• Movement in interest rates

• Finished product can change

Introducing Rick from

What we will discuss

• 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

Purpose built two dwellings on one property to be subdivided on completion of construction

What is a dual occupancy duplex?

What is a dual occupancy (duplex)?

Attached or Detached

Town Planning

• Zoning (Res B, R3

Medium Density)

• Development

Application (DA)

lodged with Council

• DA Code Assessable

• 3-4 month process

depending on Council

What is a dual occupancy (duplex)?

• 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

• Potential for building equity faster

Duplex Strategy

H&L Dual Living Duplex

Price $450,000 $500,000 $700,000

LVR 95% 90% 80%

Deposit $22,500 $50,000 $140,000

Rent pw $450 $640 $700

Rental Yield 5.2% 6.6% 5.2%

Potential Equity $35,000-$70,000

Approval time 7-9 weeks 7-9 weeks 12 weeks

Area Capital City

Major Regional

Capital City

Major Regional

NSW

Capital City

Major Regional

Duplex Strategy

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 Strategy – Type of investor

Strengths

•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

Duplex SWOT

• BuilderBuilder 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

Strata title process - Duplex

• 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

Poll: Would you like a free borrowing capacity check?

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

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 finance example 2

Where and when to buy

Where and when to buy

Where to Buy

• Regional versus capital city areas

• Affordability

• Strata title comparable sales

Where and when to buy

• Some of these duplex examples have 5%+ 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 examples

Duplex Opportunities – Collingwood Park QLD

• Land: $199,000 (669m2)

• Build: $396,786

• Total: $595,786

• Market Rent: Appraised at $640pw

• 3 bed ($320pw) per side

• Gross Yield: 5.6%

• Market Value Appraised at $600,000 to $620,000

Attached 2 x 3 bed, 2 bath

DLUG

Total dwelling size 316.22m2

or approx 158m2 per side

Registered Land

Outcomes

Outcomes

Duplex Opportunities – North Lakes QLD

• Land: $450,000 (641m2)

• Build: $369,703

• Total: $819,703

• Market Rent: Appraised at $780pw

• 3 bed ($390pw) per side

• Gross Yield: 5.0%

Attached 2 x 3 bed, 2 bath

DLUG

Total dwelling size 315.37m2

or approx 158m2 per side

Registered Land

Outcomes

Outcomes

Duplex Opportunities – Fletcher NSW

• Land: $340,000 (641m2)

• Build: $519,625

• Total: $859,625

• Market Rent: Appraised at $940pw

• 3 bed ($470pw) per side

• Gross Yield: 5.7 %

• Market Value Appraised at $880,000 to $900,000

Attached 2 x 3 bed, 2 bath

SLUG

Total dwelling size 307.31m2

or approx 154m2 per side

Land due to register in

1Q2017

Outcomes

Outcomes

Dual Living – Waterford West QLD

• Land: $235,000 (565m2)

• Build: $300,800

• Total: $535,800

• Market Rent: Appraised at $645pw

• Gross Yield: 6.3%

Attached 4 bed 2 bath SLUG

(144.89m2) / 2 bed 1 bath

SLUG (81.89m2)

Total dwelling size 226.78m2

Registered Land

Outcomes

Outcomes

• 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

• Fixed build periods

• Liquidated damages

• Fixed price

• Turnkey

“Wholesale Builders”

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

Poll: Would you like contact to discuss any of the opportunities?

Concierge Service & BuilderBuilder

• REI service that partners with BuilderBuilder

• Relationship allows us to get first look

• Comprehensive analysis done for you

• I work closely with Rick to deliver tailored solutions to our clients

• Investor focused stock

• All about the outcomes

• Negotiation is done for you, already getting the best price!

Concierge Service Inclusions

• First access to exclusive and/or off market deals prior to public release

• You will receive a 24 month subscription to REI’s Portfolio Builder tools

• You will have a dedicated Concierge Portfolio Manager (CPM)

• You will receive weekly calls and updates to ensure progress is being made

• When you reach your equity goal you will be advised so you can purchase again

Concierge Service Costs

• 100% money back if you can’t obtain pre-approval

• Free qualification session upfront

• Amount can be tax deductible

• Outcome based product, not education, not mentoring, but you will learn along the way!

Poll: Would you like a call to discuss the Concierge Service?

We can help you

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your property portfolio

info@realestateinvestar.com.au

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http://info.realestateinvestar.com.au/duplex