Each of the below points could warrant a full blog article themselves, the following is just a brief overview and I will look at expanding them in the near future.
- Borrowing Capacity.
When investing in a dual occupancy, as with any property investment; it’s very important to know how much you can afford to pay. Knowing this upfront means that you don’t waste time looking at properties that you can’t afford, and are able to narrow down the products and areas that suit your budget.
- Deposit amount or equity required.
It’s important to know what deposits or equity amounts are required to obtain the finance you need to carry out the
transaction. Different investment products can have different Loan to Value Ratios (LVR) requirements. Investment loans generally require a higher deposit or equity amount than what an owner occupier loan would. This also means that you are able to know what you can afford before beginning the process of looking for a suitable property.
- Ongoing Costs
An advantage of dual occupancy investments is that in many instances they produce a positive cash-flow. However, this isn’t true in every case so it’s important to know what the ongoing costs are and have a buffer ready to pay expenses as they arise. Expenses to be aware of are as follows: insurance, rates, borrowing and bank fees etc.
- Does this investment suit your overall investment strategy?
It’s important that any new investments suit and form part of your overall investment strategy. Luckily with the high yields available from dual occupancy investments these can be added to a portfolio and improve the overall cash-flow position of your portfolio.
- Investment timeframe.
With all property investments it’s important to know the timeframe of your investment. Property investment should always be a medium to long term investment, and if this isn’t the case then it’s very important to have advice about a suitable exit strategy.
- Ownership structure
Ownership structure is very important and can prove very expensive if it isn’t setup correctly in the beginning, as changes to titles down the track can incur stamp duty and other fees and expenses. This is most important when there is more than one person going on the title of the property, and in instances where there is a husband and wife. An accountant will be able to advise of suitable structures to minimise taxation, and convenancers can advise of structures for asset protection and estate planning.
As with any investment, location can be one of the most important decisions regarding your dual occupancy investment. There are differences in planning rules across different council areas, and this is important to know when looking and comparing dual occupancy/auxiliary investments. You will also need to consider the rental prospects, capital growth and future sales prospects of any location in which you are looking at.
Selecting the right builder is very important and can be the difference between a great investment outcome and one that’s not so good. When selecting a dual occupancy builder it is important to make sure that they have had experience with building these types of dwellings in the areas that you are looking for. It is also best to have a look at some of the previous work that they have completed to assess the inclusions and quality of workmanship.
- Property Manager
It is very important to choose the right property manager for your investment. A good property manager can mean getting a higher amount of rent, better quality of tenants, and peace of mind knowing that they are undertaking regular checks to make sure the tenants are looking after your property. It is important to choose a property manager that has experience in the area where your property is located and preferably has had experience with dual occupancy/auxiliary dwellings.
- Capital Growth Prospects
Like any property investment, the capital growth prospect of the property is one of the most important factors to take into consideration with a dual occupancy investment. Whilst a dual occupancy will generally produce a high yield, this is only half of the investment equation. Some important factors to look for in selecting a suburb with good future capital growth prospects are as follows: increasing demand for property in the area, good current and future employment opportunities, new and emerging infrastructure projects, good population growth and future population growth drivers, signs of gentrification taking place.