Everyone loves a great deal, which is why home builders may be tempted by the idea of getting two homes for the price of one. Although it costs more to build a duplex than a single freestanding house, it’s usually cheaper than building two homes, and because both dwellings are on the same block, the land costs less than two separate lots.
Duplex projects have the potential for significant profits, but considering the hidden costs, determining whether a duplex is a good investment depends on several factors and diligent number crunching.
Building a duplex or two separate homes on a single title is one of the best ways to create equity quickly while avoiding unnecessary costs and fees. But how can you do it without breaking the bank?
Duplexes are considered high-growth, high-yield investments requiring a higher financial commitment, so before proceeding to the building process, it is essential to conduct a feasibility study to determine your ideal budget.
What is a Duplex?
A duplex is a single residential property with two dwellings under one roof and a dividing wall between the two living spaces. Each side of the wall is an entirely separate home, with its entrance, parking space, yard and amenities. Usually, duplexes are on one title, meaning both halves must be sold together. However, there are times when a duplex can be subdivided into two separate titles, and each home sold separately. Finding the right duplex build is an important decision. Check out our range of the best home design constructions at MJS Construction Group.
Often, people wonder why you’d build a duplex and take on such a project. There are dozens of benefits that come with building a duplex, primarily if you use the services of a reputable buyer’s agent that will manage the whole project for you, from start to finish.
Building a duplex on a block of land instantly increases the value. It can go up tremendously once your builder completes construction. This is known as instant equity. This allows you to control your portfolio and don’t need to wait for capital growth in the market. Our clients regularly see gains of $150,000+ in instant equity in less than 12 months.
Another thing that that spurs people to build a duplex rather than buy a duplex is the opportunity to customise it. You can add linen cupboards, pick your stone benchtops, ducted air conditioning and downlights. You can choose your windows and the entire layout of the duplex to suit the demographics of the area you’re building in to maximise the return.
Positive Cash Flow
Arguably one of the leading benefits of building a duplex is the dual-income. Rent from two units. This provides you with positive cash flow, with the potential to earn 7%+ rental yields. This creates a positively geared portfolio. Having an additional income can help you pay off other debts, go on that long deserved holiday or take a break from work.
High Growth Potential
Choosing the right location for your duplex project is so important to ensure you can maximise capital growth. And the best part is, you will be gaining growth on not just one property but two properties by building a duplex. This will help you create equity within the properties, which you can then use towards a deposit for your next project or purchase, and continue growing your property portfolio.
Solid Introduction To Real Estate
When you jump into the property market for the first time, building a property gives you an excellent introduction to the entire process. Can you make a duplex on your land? Depending on your council, yes, you can. This allows you to stay close through the process, and you’re close to your tenants if you choose to rent it out.
Instant Loan Repayment Help
Chances are, you’ll take out a loan to afford the cost of building your duplex. Moving tenants into your duplex or one side of your duplex is an excellent way to get revenue flowing in. You can put your tenant’s rent payment toward your loan payment each month.
Costs To Consider When Building A Duplex
Reports and surveys
One of the first steps to pre-planning a duplex build is collating the necessary reports and surveys to determine your block’s condition.
These will help you craft a more specific list of costs and develop preliminary duplex designs and building contracts.
Without these surveys and reports, it may be harder for builders to determine exact site costs except through visual inspections and previous builds, which may not be accurate.
Physical factors relating to the site
The results stated in the surveys and reports will help determine the costs associated with the external physical factors relating to the home’s sitting on the land block.
Depending on the fall of land and soil condition, these costs may include slab upgrade, site cut or fill, retaining walls (brick or timber), rock removal and compaction of existing fill.
The costs will also be influenced by the size and orientation of your lot, the way your landfalls and the width of your block, as well as the conditions of the planning permit and local council zoning.
In order to avoid unnecessary additional costs or prolonged planning, be aware of development restrictions and requirements in your area by getting in touch with your local council. At MJS Construction Group, we have the best dual occupancy selection to make your house a dream come true.
Specific house features
You may have to spend other house features on silt and pollution barriers, termite protection, and parking requirements.
Also, consider your desired size of the duplex, the number of bedrooms, kitchens and bathrooms, as well as the quality of inclusions (a $3,000 per square meter cost may jump up to $6,000 to $7,000 if you opt for high-quality materials).
Kitchens and bathrooms are usually the most expensive parts of any build, depending on their functions and aesthetics and the quality of inclusions.
You may also want to factor in optional extras such as landscaping, fencing, swimming pools and local council costs.
While building a duplex is establishing an additional home on a greenfield site. Some investors may opt to demolish a part of their existing property to make way for the new development. In this case, consider demolition cost as part of your budget, which will involve taking out all infrastructure, underground piping, rocks and other hurdles.
Water and electrical systems
Besides external requirements, some local councils also require a retention system to restrict stormwater flow and regulate its release into the easements.
Other connections and services necessary to the build are underground power pit, temporary power pole, additional water tapping requirements (wet and dry tapping), additional sewer requirements, upgrade of existing tie and relevant permits.
Finally, before proceeding to the building process, you have to comply with the Occupational Health and Safety (OH&S) requirements as stated by law, which ensures the safety and welfare of those in your workplace.
These may require costs for additional site cleans, temporary fencing, the carriage of material (including for the dogman), associate electrical authority requirements due to power lines, double handling, crushed rock to the driveway for heavy vehicle access, additional scaffolding and tree protection requirements.
Additional Considerations and Costs
- If there is already a structure on the lot you intend to build on, remodelling it into a duplex can save you money because tearing it down and removing it increases costs.
- Maintenance for duplexes is often tax-deductible because it is an income property. This includes things like yard work and regular ongoing maintenance for both units.
- Duplexes and “semi-detached” houses are the same. They refer to a single building divided into two equal living areas but are detached from a row of houses like a townhouse.
- Duplexes usually have the same address, with one side being labelled as apartment A or 1 and the other B or 2.
- You can find a single building divided into two residences where each side is deeded separately in some areas. These are known as halfplexes or condexes, and they are treated like condos, where each owner maintains their side. However, they share expenses for general exterior maintenance and repair.
How Much Land Is Needed for a Duplex?
The exact amount of land you need for a duplex varies, just like it does for a private home. Side-by-side duplexes and single-story duplexes require larger lots than one-up, one-down duplexes, taking advantage of height to create the square footage.
In general, the total lot should be between 2.5 to 3.5 times the house’s size for a private residence. Because duplexes are shared spaces, you may decide that you do not need usable land around the building, or you may decide that you need more land to create separate yards. Either case is acceptable, as long as your building size meets your town or city codes and ordinances for how close it can be to the edges of the lot.
Pros and Cons of Living in a Duplex
Duplex living has a lot of positives and negatives to consider. If you own the duplex, living on one side and renting out the other provides a stream of income and helps pay the mortgage. Doing so means you live side by side with your tenant, making you always on-site for repairs and complaints.
Even if both you and the other resident rent, this can mean a lot of forced time interacting with one another about the property. If the other resident is a family member or friend, this can be beneficial. If it is someone you do not get along with, this can be a challenging experience.
Duplexes have shared roofs, foundations, and other areas. This means that any need for repair impacts the entire building and both residences at the same time. If it is not your side with an issue, you still need to deal with it at least some level.
However, with many people living in multi-family dwellings, duplexes mean that you only have one other family to deal with, rather than several, making for a relaxed living atmosphere. Looking for dual occupancy? Look no further! MJS Construction Group has you covered.
What Are the Drawbacks of Building a Duplex?
The very first drawback is finding the right piece of land to build your duplex. Duplexes generally require a specific size block and must have appropriate zoning to subdivide the property into two separate lots. Landowners are very aware of the potential their land holds, and because of this, may require higher premiums to purchase the land. In some cases, the premium is so high that it might not even be worth building a duplex as you may not be able to bring in enough income to cover the costs.
Another drawback of a duplex development is that subdivision of a property is not straightforward or streamlined. It can cost thousands of dollars in consulting fees to town planners and is not necessarily a task you can do all by yourself. However, there are blocks with existing approval that can help minimise the hassle, but the cost of land on these blocks will undoubtedly reflect that convenience. The lower price for land without these existing approvals might end up costing you the same (or even more) as purchasing and building on a block that already has all the needed permissions. When you consider your holding costs, you could potentially save yourself thousands of dollars and time purchasing land on a block that already has approval. Design, approval, and construction can often take over a year, and holding costs can include loan repayments, council rates and land taxes.
When you build a duplex, you do not have to use both sides of the unit as rental properties. Many people choose to live on one side of the unit and use the other side to bring in rental income or even a space to keep family members close. The cash flow generated by a tenant is also the affordability advantage you have by inhabiting the other side of the duplex. The cash generated from the tenant can help you take care of various expenses.
Although there may be some downsides to building a duplex, the overall financial victories outweigh the pitfalls if done correctly. Using Hennessy Building Projects to build your duplex is a luxury you can’t afford to pass up. We take care of everything. Our experience in building duplexes from the ground up is incomparable, and our design ideas are out of this world. When you choose our team to build your duplex, you are sure to interest renters and buyers before completing the building process. Contact us today, and we will set up a quick consultation to discuss your duplex building options. The actual cost of building a duplex to create equity will depend on the size and quality of your build, site considerations, your desired time frame and the complexity of the project.