One of the best ways to maximise your rental return on a property investment is to obtain 2 forms of income rather than just the one. However most mum and dad ‘investors’ only ever buy single income investment properties. The reasons behind this is it’s what they know, there are more single dwellings around to choose from and they may not feel comfortable with buying a duplex because it’s just that little bit too far outside of their comfort zone.
The truth is – it is actually really simple and need not be any more complicated or ‘scary’ than buying or building a single dwelling. The fundamentals all stay the same: supply vs demand, location (close to good schools, beach, town etc), neighbourhood, nearby employment etc the only thing that really changes is you have two tenancies instead of one – which is a good thing as you’ve just bought 2 investments in one go!
Another pro about a dual occupancy investment is that you minimise your vacancy risk. If, some reason, you have an extended vacancy period on one of your tenancies – and it happens so don’t kid yourself into thinking it won’t happen to you – you still have the other tenant paying their share which reduces your stress.
Delving into some numbers…..
Some basic R.O.I in my current neck of the woods would look like this:
Single family 4 bed home on 600m2 block of land in good location close to beach
- Brand New – Cost to build – $425,000 (house and land)
- Rent – $400/week
- Gross Return – 4.9%
Dual Occupancy 2 x 3 bed, single garage on 800m2 block close to good schools
- Brand New – Cost to build – $530,000 (house and land)
- Rent – $350/week each – $700/week total
- Gross Return – 6.9%
You end up making 2% higher return on your investment without doing any extra work or any further analyses.
So, if you’re looking to buy an investment property, whether it be your first one or just another one to add to your portfolio – don’t gloss over the idea of a dual occupancy home too quickly.
* FYI – Dual Occupancy is all based on one title where as Duplex is on two titles.