Bettina Schreiber and her partner like to search for properties with dual income opportunities – but they found out that dual income can sometimes mean double trouble.
“We have a few essential criteria for all of our property investments. We need them to be positively geared, it has to be somewhere where we can travel to if something goes wrong, and they need to have the opportunity for us to create a dual income.
In 2012 our buyer’s agent helped us come across a house in Cessnock, which also had a shop attached to it. The shop had been defunct for 18 months, but we ended up buying it with the hope that we could find tenants for both.
The property was in close proximity to Cessnock Hospital, and had been the ‘hospital shop’ so to speak. It is attached to a beautiful, old, three-bedroom, federation-style house.
We managed to find some tenants who wanted to open a shop and were interested in living in the house. They ended up signing the lease for three years – as both sections of the property were designated for commercial lease. The prospect of having a secure tenancy for three years gave us a real peace of mind.
The other benefit of the commercial lease was that the new tenants were responsible for paying the council rates and the water rates.
But things went pear-shaped pretty quickly. A year and a half into the lease, the shop went bust. I think it was down to a combination of the economy at that time and the tenants’ lack of experience in running a business – regardless, they were no longer able to keep up with the lease and rate payments.
In the end, we decided to convert the property to a residential title. This means that we’re no longer able to lease out the shop for business purposes, but at least we could allow the existing tenants to stay in place.
We also had to pick up the tab on some of the council rates, even before the property title was converted.
So, in hindsight, the whole business/residence combination didn’t really work out for us. Luckily, we have a backup plan.
We’ll still be able to secure a dual income from the property, in a way that doesn’t intrinsically link each income to the other.
The empty shopfront is prime for conversion to a granny flat, something which we have done to other investment properties to much success.
In addition, the house sits on a massive block of land and our plan is to fit another house into the backyard, not just a granny flat, but a proper house.
We knew that the property had more potential when we bought it – we just didn’t realise we’d be tapping into it so soon.
But as with all things, it’s about making the best out of a bad situation.
The property might not have worked out for our tenants, and it certainly caused us some short-term grief, but I’ve no doubt that it will provide a great return in the coming years."