Dual occupancy developments could retain the existing (original) house and build one new house at the backyard or in the front yard depending on size, depth, vehicle access way and how one meets the local planning requirements.
Other forms of dual occupancy developments occur when the existing house is demolished to make way for two brand new houses which could be one behind the other called a tandem design or be side by side which is called a duplex style development. In both instances, access, site frontage, depth, orientation play a key part in the design. A corner site has distinctive advantages when creating a sense of address as both the units have a valuable street frontage. A more contentious form is when one unit sits above another, which has been achieved.
What is a Dual Occupancy Property?
A dual occupancy property is when you build two or more separate properties on the same block of land. Or, it can mean building a whole new house next to or behind your existing home. It essentially means that you have two or more homes on the one title of land that will ultimately get subdivided in the future.
This can be great for accommodating family members, like elderly relatives, or if you want to get into the rental market and let out one or more of the properties while living in another.
A dual occupancy property is alternatively known as a multi-dwelling, a duplex or a ‘side-by-side’ development which means two features on the same area. These types of living arrangements give investors the flexibility and freedom while maximising potential returns from a land parcel. These properties are consolidated under the same title and reap better return on investments as compared to two separate houses.
Types Of Dual Occupancy Properties
- Duplex: Two properties that share common walls or are adjoined are classified as a duplex. It is a house divided into two individual properties and can be sold separately.
- Dual occupancy: A double occupancy is similar to duplexes and shares a common land but does not share common walls.
- Dual-key property: It is a property with a shared front entrance door and possibly an additional living space such as a living room or a kitchen. There is a section within the property that is locked and rented out to a separate tenant.
Benefits Of The Typical Dual Occupancy Development
The typical dual occupancy development is the tandem style arrangement. When the existing house is retained in the dual occupancy development, one’s capital is preserved because the asset purchased, that is the house on the land, is retained.
The house has value so think twice before you consider demolition! The only time one should consider demolishing the house in a dual occupancy development is if the house is in very poor order or there has been significant growth in the value of the property.
A dual occupancy equates to the land value being shared by two dwellings, thereby reducing the land cost to half. If one was to succeed in retaining the original home and get planning permission to build two new homes in the backyard, the cost of the land component is one third! At MJS Construction Group, we have the best dual occupancy selection to make your house a dream come true.
A Dual Occupancy Allows One To:
- Utilise an unused backyard and become maintenance-free
- Sell the newly created property subdivision and use that cash to pay down the mortgage or use it for any worthwhile purpose or investment
- If you decided to build the new dual occ home, you could move into your brand new home and enjoy the new kitchen and bathrooms
- You could then sell the original home free of capital gains tax (check with your accountant first) or rent it out for some additional income
- Or you could sell both the homes or rent them out as investment properties which generate attractive depreciation benefits
In Australia- and in particular Melbourne and Sydney, there are suburbs where the value of the land outstrips the value of the actual house!
In most middle and outer suburbs, the houses have great value as it generates rental income and is easier to finance by typical lenders.
For example, if the house is retained in the dual occupancy development, banks could lend 80-95% of the value of the property. If the house was demolished, banks tend to lend only 65-70% of the value of the land as the house has been removed. This preservation of capital in the eyes of the lender reduces the risk because if for any reason, the development does not go ahead, the asset retains its value. Even after the redevelopment, the value of the existing dwelling is by and large retained.
The existing dwelling also generates rental cash flow during the planning process and in some cases, even when the development is underway. This cash flow cannot usually be generated from a vacant allotment.
Dual Occupancy Profitability
Dual occupancy developments are profitable because it maximises the land value.
One generates twice the value from the original house and land as two houses generate two rental incomes. Even if you sold, say the existing house chances are it will be free of capital gains tax which might pay off your mortgage, any debts or release cash to be used for other worthwhile ventures.
Very often, after the dual occupancy subdivision is completed, the original home is sold for almost the price one paid for the whole block of land with the house. The second house then becomes the cream.
Dual Occupancy Sites
There is a myriad of things to consider when finding a suitable dual occupancy development site. Some of these are listed below. The cost of the site should result in acceptable development margins
- The site width should allow for two crossovers in the ideal scenario, but many Councils in Melbourne are clamping down on this
- The vehicle accessway should be compliant and meet the new mandatory safety standards
- The site length and area should allow adequate north-facing open space for recreation and landscaping
- The site should be close to infrastructure, schools, shops and transport
- The title should be clear of restrictions and preferably without any easements
- All the essential services should be available onsite or in close proximity and run in the most advantageous position
- The site orientation should be perfect so that the amenities of neighbouring properties are not adversely affected
- The zoning of your land and it’s associated Schedule should not be restrictive
- The planning overlays on your land should not be too restrictive
- The site should be fairly level as sloping blocks may cost more to build. However, sites with great views benefit from sloping land
- There should be little or no significant vegetation on the site and on abutting sites within say 5 m of the common boundaries
- A soil test should demonstrate the foundations will not require additional strengthening
- There should be no encroachments on your title boundary or by your property on adjoining allotments
- There should preferably be precedents for similar development in your neighbourhood
- There should be no planning overlays burden
- Your local Council should encourage development to meet its housing stock forecast
Can I Sell a Dual Occupancy?
Yes, of course! That’s the whole reason you subdivide so you can sell each lot separately and maximise your return on investment. Let’s unpack how you can do it.
First, you either own or purchase land that is suitable for dual occupancy. Then, you begin the planning process to get approval for the dual occupancy development. As you make your way through the build process and construction commences, you begin the process of subdividing the lot.
At Little Fish, we like to market and sell our subdivided properties of the plan. Once construction is complete, and we’ve sorted the subdivision approval, your buyers can settle immediately. So you will see your profit faster.
Suppose you wait until the properties are complete and run a real estate auction or private sale campaign. In that case, you’ll need to wait for the property to be listed for sale, have it on the market for several weeks (at the very least!), and then wait for the agreed settlement period which is usually 60-90 days.
Sometimes you may get more for your properties running a sale campaign after the new properties are completed like we just discussed, but each project and situation is different. It’s important that you understand the different options and know that they’ll each have an impact on when you’ll receive payment.
Can a Single Property from a Dual Occupancy Project be Sold Separately?
Any property that sits on its title can be sold separately. So, when you begin a dual occupancy, the end goal is to subdivide, so each dwelling sits on an individual title. You can then put them on the market separately. Planning for a new look for your house? Look no further! MJS Construction Group is here to help in your dual occupancy builder Melbourne.
How can I Build a Dual Occupancy?
You have a few options here. The first is by building a separate dwelling in your backyard that shares a driveway if you have enough space. Then you would subdivide the lot, so both homes end up on their title. The driveway would then become common property.
You can then sell them both, sell one and rent one out or rent them both out! You’re spoiled for choice here. Either way, you’ll come out of the project with some money in the bank or additional equity in your investment.
The second option is for those with an appropriately sized lot – you can knock down your existing home and build two or more new dwellings. You’d then subdivide the lot, and each dwelling would end up on its title of the land. Depending on the size of the original lot and your intentions, these dwellings could be either semi-detached or completely detached.
So there you have it, you should now know what a dual occupancy subdivision and or property is.
Why Choose This Style of Home?
The main aim of this building style is to establish two income-producing properties on one site. The model also appeals to varying demographics, ranging from students on a budget to the older generation who want the security of having someone close by.
The homes are also likely to be cash flow positive and have the increasing potential of providing a higher return on investment (ROI). In short, more and more people are turning to this style of living as a way to build wealth faster, and have multiple income streams at significantly lower costs.
Advantages of Dual Occupancy Living
There are several advantages and benefits that come with dual style living. Aside from it being a good way to get a great return on your investment, you can enjoy:
Great Fit For Families
If you are considering this style of living because you want to keep your family close but still have a bit of space, this style of living can be the ideal option.
Each household has a private entrance and living rooms, yet they are close enough to be on call should they need it. Often this is popular for people whose parents want to be near the family.
Naturally, most people will be interested in the return on their investment. With these homes, you have complete control over collecting your rent from both dwelling areas. This means that you would potentially almost double your rent by owning this type of space, allowing you to get a higher return on your investment.
More and more people are turning to dual occupancy builders to construct this type of home for them, purely because of the added cash flow it generates to repay any home loans off quicker.
Great Way To Enter The Property Market
Dual occupancy houses are attractive as rental prospects for tenants. This is because there are additional design requirements and finishes that go into this type of home, making them more attractive than the average apartment. For example, noise insulation, extra privacy measures, and added comfort features such as an ensuite, have to go into the building design. The takeaway from this is that it will never be difficult to find rental tenants for this type of home.
Our top tips to consider when building a dual occupancy home:
- Block frontage width: You will need a street frontage of more than 12m (ideally around 15m)
- Block dimensions: The average dimensions needed for a dual occupancy design are 15.24m wide x 43.5m deep (approx. 635sqm)
- House footprint: Generally you cannot have the house footprint covering more than 50% of the block (approx. 62 squares)
- Driveway crossovers: You cannot have two driveway crossovers within a 12m frontage. You will also need to check whether street trees or electricity poles are going to affect where you place your driveways.
- Feasibility: You will want to ascertain whether there is going to be a financial gain by you doing this. If you engage an experienced builder, they should be able to provide you with more guidance on this and help you do the number crunching. Good builders will want to see you get the most out of your asset and should help you achieve this.
- Upgrade costs: When looking at the base price of designs on offer, always keep in mind that you will need to multiply every additional inclusion by two (because there are two properties). This can add up quickly!
- Council approvals: On average, it will take 3-6 months to get dual occupancy designs through Council. You will want to select a builder that manages this process for you, as it can be more complex than a single dwelling approval.
- Dual occupancy for a greenfield estate: If you are in a greenfield estate, you will need to check whether there is a single dwelling covenant (meaning you cannot build a dual occupancy dwelling). It is often not worth the investment, for the lower resale you will get in these locations, this is why dual occupancy home designs are more commonly for knock-down rebuilds.
Design tricks for a dual occupancy
One of the complexities when designing a dual-occupancy house is that you are working with a limited footprint, and when planning the layout of the spaces, there are restrictions you are working with. Finding the right duplex build is an important decision. Check out our range of the best home design constructions at Hitch Property Constructions. MJS Construction Group.
Some spaces need to be on the ground floor and therefore, will take up precious sqm of your house footprint. Therefore these spaces need careful consideration.
- Consider a single garage instead of a double
- Include the office, laundry and powder room next to the garage.
- Place the stairwell above the pantry (you can’t waste valuable space with wide stairs in the centre of the house)
- Move the kitchen to an internal wall to increase window space
Before you make the decision, you need to do some preliminary research to ensure you understand all your options. Consider the benefits of this approach; look online to see what designs are available, and then start talking to builders who specialise in dual-occupancy dwellings to get a feeling for what you can build for your budget.
Because dual occupancy properties are not very common at this stage, they can be difficult when it comes to bank valuations. Valuers value the property on its value as a structure and the land. Therefore, while the perceived value to us is quite high (two income streams, two different dwellings), valuers don’t consider this. For example, the five-bedroom, three-bathroom property we mentioned before, would be valued just like that. Whereas in reality, it is designed as one three-bedroom, two-bathroom property and another two-bedroom, one-bathroom property – likely to be of higher value.
Builders often construct new dual occupancy properties as two separate dwellings with different power meters, water meters and hot water systems. This means that more time and resources are required to build them.
Because of this, the disparity between building costs and the valuation can mean a larger deposit or more equity needs to be provided in order to receive financing.
However, if an investor can afford that extra outlay, they’re likely to recoup it over the years of ownership in increased cash flow. We can expect that by the time they sell the property, the real value of dual occupancy properties will be recognised across the market and a sale price that affects this will be achieved.