7 things you should know about building dual occupancy properties in QLD

There are different products available in different States but this article is going to focus on Queensland, and specifically the Logan Council Area South of Brisbane and the Ipswich Council Area West of Brisbane.  The definition of a dual occupancy property is where there are two properties on one title which can’t be strata-titled and have a restriction on the size and number of bedrooms allowed in the second dwelling.  This is different from a duplex, which allows for strata titling and doesn’t have strict rules regarding the second dwelling size and number of bedrooms.

 

1) There Are Different Definitions and rules across Different Council Areas

 

In Queensland, the dual occupancy is managed by each individual local Council.  As such, there are different rules which need to be considered in each Council area.  In some States in Australia there are State based rules which govern the whole state, but for Queensland, each Council area varies.

Since we’re mainly focussed on the South East QLD region, I’m going to discuss a couple of the areas which we have had numerous successful builds undertaken for our clients.  The differences across the following two areas is a great example of the differences across different Council areas.

 

Logan City Council

The definition under the Logan City Council is a premises that contains two dwellings on one lot (whether or not attached) for separate households, both dwellings are owned by the same person and must conform to the following rules:

  • Two bedrooms maximum
  • One kitchen maximum
  • One Living space maximum
  • Only one vehicle driveway
  • A maximum size of: 70m2 for residential zoning on lots less than 1000m2; or 100m2 otherwise.

 

The designs that we produce for our dual occupancy properties in the Logan City Council area for residential blocks of land less than 1000m2 and have auxiliary dwellings with a maximum of 70m2 of living area. They also have two bedrooms, one kitchen and one living area and only one driveway crossover.

 

Ipswich City Council

The Ipswich City Council use the term ‘Auxiliary’ to refer a dual occupancy.  The Ipswich City Council define this as a building or part of a building which is used as a secondary residence not exceeding 50m2 gross floor area, with a maximum of one bedroom which is associated with a dwelling on the same lot.

As such, the designs we produce for dual occupancy auxiliary units in this area have a maximum of 50m2 of living area and a maximum of 1 bedroom and 1 driveway crossover.

 

 2) They’re not available everywhere

 

As mentioned above, there are a number of different terms which are used across different Council areas.  However, it is worth noting that not all Council areas allow for the dual occupancy product where you have a second dwelling on the one title and are able to rent it out to unrelated parties.

For example, there are some Council areas in South East QLD where you are able to build this type of product but you must sign a statutory declaration stating that you are going to rent it out to a family member, in essence making it a true granny flat.

Many Council areas allow duplex properties where there is a set of council fees, headworks fees, and then a process similar to a material change of use for the block of land to make it into a duplex block, similar to the definition of a duplex outlined below.

We are only able to produce these properties in the council areas that allow for the dual occupancy concept.  This means we undertake careful research and study into the different suburbs and pockets within each of the Council Areas which have the best capital growth drivers and rental demands.

 

 3) Dual Occupancy is different to a Duplex

 

Dual occupancy properties are similar to duplexes, however, the key difference is that a dual occupancy can’t be strata titled, so they don’t allow the owner to sell off the individual halves separately if they wanted to.

Dual occupancy properties generally have stricter size and bedroom requirements for the smaller auxiliary dwellings than what duplexes have.  Other than these key differences, the dual occupancy product is very similar to a duplex for the construction methods.

Each dual occupancy has the same fire wall and fire protection between the two dwellings, they also have the same separate metres for power and water where possible.  This would mean that if there were a change in the council rules regarding the ability to strata title a dual occupancy property, then the builds that we produce would have all the fundamental requirements to allow this to happen.

As dual occupancy properties aren’t strata titled, they don’t have the second set of rates to pay that duplex properties do, this is an additional saving to the investor’s cashflow.

As mentioned above, there are size and room restrictions in both The Ipswich and Logan Areas.  It is therefore most common in the Logan area to see a dual occupancy property which has a 3 or 4 bed / 2 bath / single garage main dwelling and a 2 bedroom / 1 bathroom / single garage auxiliary configuration.

In Ipswich it is most common to see a 3 or 4 bed / 2 bath / single garage main dwelling and a 1 bedroom / 1 bathroom / single garage auxiliary dwelling.

The difference in the configurations is due to the Ipswich city council only allowing a 1 bedroom auxiliary.  In both the Logan and Ipswich areas, it is common to see configurations such as 3 or 4 bedroom / 1 or 2 bathroom / 1 or 2 garage on both sides of the duplex dwellings.

In many cases a council will allocate specific requirements to block types for duplex properties.  An example of this is that in the Logan area, a block must be at least 800m2 for a code assessible duplex.

This means that blocks of this size are in very high demand and this drives up the price.  As a dual occupancy property in the Logan area can go on almost any block size, an investor has a far greater choice and isn’t faced with sellers adding premiums and forcing up land prices.

 

4) They offer a Great Yield

 

One of the best things about dual occupancy properties is that they offer a great yield.  By getting two rents from the one property a dual occupancy dwelling is able to get a yield far higher than a standard house.

As there aren’t all of the additional expenses associated with a duplex property such as council headworks, strata title fees, 2 sets of rates etc, a dual occupancy property will generally yield much better than a duplex.

Duplex blocks are generally more expensive than a standard block of land as developers or land sellers price blocks higher when they know that they can be used to fit a duplex rather than just a standard house.  As a dual occupancy / auxiliary property is able to fit on almost any block in a Council area that allows for them, there isn’t the higher price associated with them.

In short, dual occupancy properties offer the additional income that duplexes do but with far less expenses in the land, building, and approval process meaning they produce a much better yield.

 

5) They Rent Very Well

 

Dual Occupancy Properties have proven to rent very well.  The smaller auxiliary sides of the pair have proven to rent well, generally renting faster than the larger 3 or 4-bedroom side.  We believe that the reason for the popularity of the smaller auxiliary side of the dual occupancy is because of the suburbs in which we have been building these properties.

The suburbs that we have built them in don’t have that much comparable smaller 1 and 2-bedroom accommodation on the market.  There is a large number of houses and some townhouses built in these suburbs but very few smaller properties that would compete with these.

When you are in Brisbane city there are large numbers of apartments that are one and two bedrooms which would compete with the rental of these auxiliary properties. However, as the suburbs we build in don’t have apartments on the market, we see very strong demand and a lack of supply.

There are many people who are looking to rent smaller low maintenance properties and aren’t looking for a whole house that are very well suited to these properties.

Another advantage of renting these properties is that there aren’t large apartment buildings or higher density complexes being developed.  When there are inner-city suburbs with large higher density properties being developed and hitting the rental markets, the additional supply can cause a short-term oversupply which drops the average rents in the area.

 

6) Not all builders will build them

 

It’s important to remember that not all builders will build a dual occupancy property.  In fact, if a builder hasn’t had experience building one of these types properties before then you probably don’t want to be dealing with them for one of these builds.

The building of a dual occupancy property is a more complicated process than a standard house, and it’s best to know that you are dealing with a builder who can carry through with the job.  They are much harder to estimate the costs for, especially for a builder that hasn’t built one before.

It is also good to be able to look at and possibly walk through some that are under construction or a previously built product, as this will enable you to gauge the quality of workmanship that the builder has. Previous work is sometimes a good indicator of what you may be able to expect from future work and definitely a better indicator than a display home (which are generally much higher quality than standard)

Also remember that a builder is only as good as their tradespeople and the finishes that the tradespeople provide.  A builder who has been in the industry for a long time and has other properties under construction is more likely to have good quality tradespeople that have been producing a great product.

 

7) Designs are really important

 

Design work is important for all properties that are built, however it is even more important for a dual occupancy property.  Because of the size restrictions on the auxiliary dwellings, it is very important that the designs make the maximum use of the size available.

There are a number of key design ideas that we try and incorporate to ensure that we maximise the use of space.  This can include the use of European laundries and ensuring that there are no hallways or wasted space areas in the auxiliary unit.

Also, because of the fixtures and fitting, the costs associated with building a dual occupancy can add up very quickly if you’re not careful. This includes the additional kitchens and bathrooms, on top of the extra requirements of separate power and water metres and fire protection.

This makes it even more important to focus on keeping the designs tight and within budget.  If a dual occupancy becomes too expensive it will lose its high yield, which is generally the key investment goal associated with this investment class.

By observing the above information for dual occupancy properties, we can see that the restrictions are 50m2 of living in Ipswich and 70m2 of living in Logan.  These areas don’t include the garage or the undercover alfresco areas.  We can therefore design the alfresco areas without too much concern for size restrictions; these are very important in QLD as many people spend time outdoors for much of the year and also take these into careful consideration when looking for rental properties.

When designing a dual occupancy dwelling it’s very important to remain focused on what the final purpose of the property is. In this instance, it’s an investment vehicle which means that it should be designed to get the best possible yield whilst being attractive to prospective tenants.

This means that it’s very important not to over-capitalise and to have adequate levels of fixtures and fittings to meet the design.

Capital Wealth Properties are specialists in dual occupancy properties and we build in Melbourne, Sydney and Brisbane. If you would like more information or need help with assembling a dual occupancy opportunity, please do not hesitate to contract us.

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