Dual Occ’s vs Duplexes

Which is better for you?

Let’s start with some definitions so we’re on the same page.

I define a Dual Occ (Dual Occupancy) as two dwellings on the one title. There is only one set of rates and the dwellings must be sold together…you can’t sell them separately.

A Duplex on the other hand starts out like a Dual Occ but is strata titled at the completion of construction so that each dwelling has its own title and can be sold separately. There are two sets of rates…one for each dwelling. Strata titling can cost up to $40k but this is offset by the extra value (Instant Equiy) the strata titling has brought about. I would not personally look at a duplex pair if the market appraisal was not at least $80k above the contract price.

There are advantages and disadvantages of each:

Dual Occ Pros & Cons

  1. Cheaper…no strata title fees to be paid.
  2. Higher yield than duplex because the duplex costs $40k more but achieves same rent.
  3. Strongly cashflow positive as you receive two lots of rent for one block of land.
  4. One set of rates.
  5. Valuations normally come in on the money.
  6. Can’t be sold separately.
  7. No instant equity.

Duplex Pros & Cons

  1. About $40k more expensive due to strata titling costs.
  2. Lower yield than duplex because the duplex costs $40k more but achieves same rent.
  3. Strongly cashflow positive as you receive two lots of rent for one block of land.
  4. Two lots of rates to pay.
  5. Valuations MAY come in up to $40k lower than contract price because many valuers will only consider the land cost and the build cost…they don’t take in to account the cost of strata titling and the greatly increased end value of the duplex pair. Of course once the duplexes are strata titled they can be revalued to reflect the new increased value of the duplexes.
  6. Can be sold separately.
  7. Considerable instant equity…up to $150k or 28% above contract price!!

Which is best for you?

In general I consider duplexes the best option because of the Instant Equity, BUT, BUT, BUT, the only fly in the ointment is the possibility of a valuation that may come in up to $40k short because the valuer wont consider the cost of strata titling until it is strata titled.  If you have the bare minimum deposit or insufficient equity in an another property you will NOT be able to proceed if you have a low valuation. In this case you are better off with a dual occ. as there are usually no insurmountable valuation issues.

Dual Occs are a better option with people who have a low borrowing power or low deposit or both. First time investors are usually better off with a dual occ unless they have plenty of equity in which case they should consider a duplex and only duplexes with a good Instant Equity.