Finance advice
Nidal Rasheed

Building a duplex to create equity

By Nidal Rasheed

Silvertail Property Group's Nidal Rasheed shares the basics for building a duplex for beginners—a strategy that could help an investor avoid unnecessary costs and fees while creating equity quickly.

Blogger: Nidal Rasheed, managing director, Silvertail Property Group

Keen to build equity through property investment, but short on time? A duplex may be the right investment strategy for you. I’ll help you discover the benefits and things to consider before you start.

A duplex is two separate homes built on the same title that has the ability to be retitled as strata titles after construction is complete. It maximises the potential of the land and doesn't require subdivision for the two properties to be built. Advantages of building a duplex include:

  • Reduced build costs
  • Lower stamp duty, holding fees, insurance costs and council rates
  • No strata fees
  • Higher tax depreciation

But the greatest advantage of a duplex is the ability to create equity quickly with a high rate of return on your investment.

Example: The land, cost to build two homes, subdivision fees and council fees could cost you around $600,000. Once the houses are built and subdivided they could be sold for $350,000 each, making you a profit of $100,000 – all within 12 to 18 months. Alternatively, each property could be rented for $350 to $400 per week, achieving a high return of 6.1 per cent to 7 per cent.

Generating a high return from a duplex sounds great, but you need to consider if this type of investment suits your circumstances.

Top 10 things to consider:

  1. It’s a high growth and high yield investment, but with that comes a higher financial commitment than just buying an existing house or individual house and land package.
  2. A duplex is a positively geared investment with the potential to create equity in a calculated way.
  3. Buying purely on price can be a pitfall – you get what you pay for.
  4. You must have the capacity to cover a 20 per cent deposit, i.e. $100 to $150,000 in equity. It can be achieved with a lower deposit but that would create higher risk (discuss this with you advisor).
  5. You must be able to service a large loan.
  6. Great for someone who is time-poor and wants to invest strategically.
  7. Creates the ability to fast track your wealth, so it’s great for retirees.
  8. You have the option to rent out and achieve an ongoing high interest return.
  9. Only certain councils will allow duplexes. NSW and Queensland are more favourable to duplexes because of population growth the housing shortage.
  10. Seeking help from professionals means you can save time and avoid mistakes.

Where should you start?

Step 1: Meet with an advisor to understand your financial capacity and the tax implications.
Step 2: Decide on your end goal – consider what you want to achieve through this investment. If you don’t, it’s like getting dressed and hopping in the car, but not knowing where you are going!
Step 3: Research and develop a plan of action. You can’t buy property overnight so start researching and making steps towards your goal.
Step 4: Take action and make it happen. Once you've decided that this is the ideal strategy for you, take action and make it happen!

With the ability to generate equity quickly, and provide a higher rental yield per square metre, a duplex is the smart way to invest. However, investing in property is not ‘one size fits all’, by understanding the things to consider when investing in a duplex you can decide if it’s the best way for you to create wealth.

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About the Blogger

Nidal Rasheed

Nidal Rasheed

Property investment expert and award winning entrepreneur Nidal Rasheed is Managing Director of Silvertail Property Group. Mentored by top industry figures, Nidal has developed a business ethos that breaks conventional thinking and challenges the standard approach to business and investment.

Nidal has an enduring passion for inspiring growth, creating wealth and enabling financial freedom for his clients and his employees. He is focused on developing long-term relationships with his clients and serving them in the best way possible through a stress-free, streamlined, investment process.

With a strong determination to succeed, Nidal aspires to live a purposeful, balanced life with his growing family as his constant focal point.

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  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1206 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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