How to pick new duplex projects that deliver equity,

growth and cashflow

Introduction

• Positive Real Estate (PRE) has a long standing relationship with REI

• PRE has now formed a strategic partnership with REI combining its extensive property strategy and acquisition experience with REI’s leading research and analysis capabilities

The next 30-40 minutes

• What is a dual occupancy (duplex)?• Town planning

• Finance overview

• Strata overview

• Duplex Strategy• Pros and Cons

• Market timing – when to buy

• Best areas to buy in

• Duplex Properties Overview

What is a dual occupancy (duplex)?

Purpose built two dwellings on one property to be subdivided on completion of construction

What is a dual occupancy (duplex)?

Attached or Detached

What is a dual occupancy (duplex)?

Town Planning

• Zoning (Res B, R3 Medium Density)

• Development Application (DA) lodged with Council

• DA Code Assessable• 3-4 month process

depending on Council

Duplex Strategy

• Price point $550,000 +

• Advanced strategy for a client who has already done a dual living or house and land

• Strong yields and cashflow

• Flexibility of 2 properties in 1

• Manufactured equity

H&L Dual Living Duplex

Price $400,000 $460,000 $600,000

LVR 95% 90% 80%

Deposit $20,000 $46,000 $120,000

Rent pw $420 $600 $660

Rental Yield 5.5% 6.8% 5.7%

Potential Equity

$60,000

Approval time 7-9 weeks 7-9 weeks 12 weeks

Area Capital CityMajor Regional

Capital CityMajor RegionalNSW

Major Regional orRegional

Duplex Strategy - Comparison

Duplex Strategy - Type of Investor

H&L Dual Living Duplex

- Low deposit looking to get into a deal

- Looking for med to long term capital gain

- First land and construction deal

- Low income with minimal serviceability

- First home buyer to rent out secondary dwelling to an investor

- Negative geared property portfolio

- High income looking for equity not cashflow

- Turbo charge portfolio with 2 strata titled properties

- High income needing deductions

- High borrowing capacity- High deposit required up to

20%- More experienced property

investor who has done a land and construction deal

- Looking to recycle deposit and move onto another deal on completion

Duplex SWOTStrengths•High land content compared to units•High cashflow•Multiple income streams - less vacancy risk•Stamp duty on land only (1)•High LVR lending in category 1 areas•Median pricing more stable than units in market downturn•Create development equity during construction

Opportunities• Buy from developer in bulk –

discount (5)• Land developers increase land

prices in subsequent stages (6)• Purchase in an estate with high

owner occupier ratio• Purchase infill sites close to city

centre (7)• Having access to wholesale build

terms to maximise equity gain (5)• Strata title allows individual sale

of units• Refinance equity out upon

completion

Weakness• Longer approval timeframe for DA• Client needs to pay interest b/w land

settlement and tenant moving in• Higher price point• Body corporate fees once strata titled• Limited duplex lots available in new

estates• Finance from 80% LVR up to 90% LVR• Specialised valuation and funding

Threats• Urban sprawl estates – over supply• Investor estates• ‘Cowboy’ retail builders resulting in

bad client experience• Council infrastructure charges reduce

profitability

Strata title process - Duplex

• PRE duplex packages include cost of obtaining strata title• Building Format Plan (BFP)

• Community Management Statement (CMS)

• Headworks Charges

• The BFP and CMS are lodged with council along with the final occupancy certificate on completion of the duplex

• Council releases approved stamped plans and documents

• Builder lodges documents with titles office

Duplex Finance

• Duplex finance is specialised

• Finance broker needs to know what type of valuation to order and which funder to use

• Valuation can be done in-one-line or strata titled

• Example in Toowoomba for 5 bed duplex (3 bed + 2 bed)• In-one-line valuation $480,000

• Strata title valuation $600,000

• Most lenders will lend 80-90% on in-one-line valuation only

Duplex Finance Example 1

Construct and refinance

• Borrow 80% LVR of package price $550,000 = $440,000

• Deposit $110,000

• Refinance on completion at 90% LVR assuming 10% uplift in value = 90% x $605,000 = $544,500

• Release $544,500 less $440,000 = $104,500 of equity!

Duplex Finance Example 2

Construct and sell 1 of 2 then refinance

• Borrow 80% LVR of package price $550,000 = $440,000

• Deposit $110,000

• Sell 1 duplex on completion for $302,500 less 3% selling costs leaves debt of $146,575

• Refinance on completion at 90% LVR assuming 10% uplift in value = 90% x $302,500 = $272,250

• Release $272,250 less $146,575 = $125,675 of equity!

Duplex – Where and When to Buy

When to Buy

Duplex – Where and When to Buy

Where to Buy

• Regional versus capital city areas

• Affordability

• Strata title comparable sales

Duplex Examples

• All of these duplex examples have between a 10% - 25% potential uplift in equity based on either an agent’s market appraisals or registered mortgage valuation

• Duplexes can be completed in well under 12 months for registered land

Duplex Example 1 – Toowoomba QLD

Attached 2 x 3 bed, 2 bath single garage

Land: $210,000

Build: $395,000

Total: $605,000

Market Rent: Appraised at $660pw

3 bed ($330pw) per side

Gross Yield: 5.7%

Market Value Appraised at $670,000

Total dwelling size 264m2 or approx 132m2 per side

Land registers July 2015

Duplex Example 2 – Tamworth NSW

Attached 2 x 3 bed, 2 bath single garage

Land 927m2Land: From $126,500

Build: From $430,000

Total: From $556,500

Market Rent: Appraised at $660-700pw

Gross Yield: 6.2%

Valuation of $610,000

Total dwelling size 271m2 or approx 135m2 per side

Land Registers July 2015

Duplex Example 3 – Peregian Springs QLD

Attached 2 x 3 bed, 2 bath double garage

Land: From $273,600Build: From $504,300

Total: From $777,900

Market Rent: Appraised at $960pw

Gross Yield: 6.4%

Market Value Appraised at $850,000

Total dwelling size 341m2 or approx 170m2 per side

Registered Land

‘Wholesale’ Builders

• 3-5 builders to cover key areas Australia wide

• Have proven themselves to be reliable, quality builders

• Standard pre-negotiated build contract terms

• Have proven in-house construction management system

• Building Contract standard for H&L, dual living and duplex

• 16 weeks, 18 weeks and 20 weeks

• Liquidated damages

• Fixed price

• Turnkey

Wholesale Advantage

Retail Wholesale

Build Period (House)

26 weeks 16 weeks

Build Period (Duplex)

32 weeks 20 weeks

Liquidated Damages

$20 per day = appraised rent

Builder variations Often None

Turnkey Rarely Yes

Build Commencement

6-12 months 3-4 months

Contracts Mgt No Yes

Construction Mgt Sometimes Yes

Handovers.com Sometimes Yes

Next Step…

Submit your details now by using the link below to find out:

• Detailed information on each of the duplex projects

• Next steps if you are considering securing one of these opportunities

• How to make sure this strategy suits your personal situation

It's true there are big chunks of money to be made in real estate at the moment... but if you're not in the market right now, you will miss out on great opportunities like these.

www.positiverealestate.com.au/duplex