Australia’s demographics and property density preferences are changing – so as new investment opportunities emerge, you need to know how they can help your bottom line.
Just to define what I mean by dual-key dwellings; it’s a single-titled property with two separate entries and two separate living spaces/residences including their own kitchens, bathrooms and garages. Think of it as a duplex property with two residences on one title. For example you can have a 3x2 and a 2x1 under the same roof but with two distinct entries.
This provides great yield for any investor and is even better in an SMSF bare trust.
Such dual-key properties are a fairly recent emergence in Australia; however they have existed for decades in places such as United States, Europe and Japan.
Unlike duplexes, dual-key properties enable one space to be shared by two separate parties or tenants. You can even live in one space and rent out the second space to support your mortgage.
The property may have only one major entrance from which the two different apartment entrances come together but they do not share any other space under the roof. Usually we look for dual house and land packages that have entrances at different sides of the building to provide privacy to the two different tenants. Each tenant will actually have separate keys that unlocks their own residence.
The pros and of a dual-key investment:
- Two income-producing properties on one title (unlike duplexes and townhouses that require separate titles).
- Higher than average market yields due to the savings on costs compared to two separate titles.
- The property unit owner of an apartment will only need to pay strata for one property, not two.
- Each portion is leased separately, offering investors great scope for maximum rental return.
- In an ageing population like ours dual-key provides the extra space for a parent or elderly relative to live close-by (but still with some privacy and separation).
- Alternatively you can reside in one apartment and rent out the other.
- Most urban students desire to live within walking distance to everything: their campus, CBD centres, and transport hubs. Dual-key properties may be attractive to students who seek a well located, low maintenance/low common area cleaning property.
The cons and of a dual-key investment:
- Because dual-key is a relatively new property type in the Australian market, many buyers in the market don’t understand the benefits.
- Being a single title you cannot sell each residence individually. However with the apartments you can sell it as two single residences or a two-bedroom apartment.
It is a great sign of the times that dual-key properties are on the uptake. With limited urban space and continually high-demand to occupy it, this property type could be a good compromise between human density and quality of life.
As a prospective investment property it has major benefits over traditional investment types but, like all property types, would-be investors need to prepare a personal cash flow analysis that can crunch rental and capital growth numbers and consider all the issues a dual-key property type presents, before signing anything.
With over 21 years’ experience in the financial services industry coupled with 10 years in strategic property research, Harry has worked as a financial planner in large international Australian banks and boutique firms alike. He draws on his financial planning knowledge, passion and experience to help his clients grow their own wealth as they reduce their risk through personalized strategic property investing.
Harry is the founder and director of Properties Invest Australia Wide.