Devel­op­ing: Steph Nash Build­ing a du­plex

Prop­erty own­ers are max­imis­ing the value of their home or in­vest­ment by cre­at­ing a du­plex

Money Magazine Australia - - CONTENTS - STORY STEPH NASH

Cre­at­ing a du­plex is a great way to cap­i­talise on the land that you al­ready own. And if you’re look­ing to buy an in­vest­ment prop­erty, con­vert­ing your new pur­chase into a du­plex can help you get a bet­ter re­turn on your money.

With the Syd­ney mar­ket in par­tic­u­lar go­ing gang­busters, du­plexes have popped up all over the place. Peter Ge­orgiev, chief ex­ec­u­tive of Archi­cen­tre, says he has no­ticed a boom in du­plex de­vel­op­ment.

“If only sub­ur­ban de­vel­op­ments were re­stricted to du­plexes!” he says. “De­vel­op­ers [around Syd­ney] are seek­ing to max­imise yield in the es­tab­lished mid­dle sub­urbs com­monly com­pris­ing ‘quar­ter-acre blocks’.” Why? Be­cause a du­plex, which is es­sen­tially two homes oc­cu­py­ing com­mon land, can help max­imise the value of the land you al­ready own.

If you’re devel­op­ing to sell, you can po­ten­tially dou­ble the value of the orig­i­nal prop­erty, and if you’re devel­op­ing to in­vest you can cre­ate a high-yield­ing prop­erty with­out hav­ing to pur­chase new land. This means lower stamp duty, hold­ing fees, in­sur­ance costs and coun­cil rates and po­ten­tially higher tax de­pre­ci­a­tion.

Gavin Man­sour, from Man­sour Build­ing Ser­vices in Syd­ney, says a du­plex is also a highly cost-ef­fec­tive way of up­grad­ing your ex­ist­ing prop­erty, as you can sell or

rent the sec­ond dwelling to off­set the cost of the new fam­ily home.

“Some clients of mine have pre­vi­ously lived in an older style house with out­dated fit­tings and fixtures,” he says. “So by build­ing a du­plex and sell­ing one of the dwellings, they would be left in a sim­i­lar fi­nan­cial po­si­tion as pre-de­vel­op­ment with the added ben­e­fit of liv­ing in a brand new home. They may even pocket a tiny profit.”

And in Syd­ney, where the cost of prop­erty is so ex­pen­sive, many of Man­sour’s new clients have been devel­op­ing du­plexes to help their adult chil­dren find an af­ford­able way into the prop­erty mar­ket.

“It’s hard to buy prop­erty in Syd­ney. If the client’s chil­dren are of a younger age, by the time they are old enough to live in them the cap­i­tal growth would be great.”

At­tached v de­tached

There is one as­pect of build­ing a du­plex that turns peo­ple right off: shar­ing a com­mon wall with a neigh­bour. Even though the at­tached dwelling would have a sep­a­rate en­trance and liv­ing fa­cil­i­ties, the shared wall and drive­way may clash with your de­sire for space and privacy and mean an in­stant veto against the idea. But shar­ing a wall doesn’t al­ways have to be the case.

If your block sat­is­fies the min­i­mum size re­quire­ments for de­vel­op­ment (check with your lo­cal coun­cil), you also have the op­tion to cre­ate a du­plex that con­sists of two de­tached dwellings shar­ing the same block of land. The pros are ob­vi­ous – more space and more privacy for both house­holds. But this doesn’t

come with­out the sig­nif­i­cant added costs of cre­at­ing two dwellings with sep­a­rate drive­ways.

“De­tached is def­i­nitely bet­ter, as you are not shar­ing a com­mon wall with your neigh­bour,” says Man­sour. “Even though com­mon walls are built to limit sound be­tween the units, it is never elim­i­nated 100%.”

Size

Your lo­cal coun­cil will de­ter­mine the min­i­mum block size for devel­op­ing in your area. Ob­vi­ously the big­ger your block the bet­ter the de­vel­op­ment, as you and your fu­ture neigh­bours or tenants will en­joy more spa­cious liv­ing. There’s also more of a chance that you could build de­tached dwellings with­out sac­ri­fic­ing too much space.

Man­sour says that blocks be­tween 600sqm and 650sqm will be enough to give you good value for your money. But smaller lots will re­duce your in­vest­ment re­turn as you will be lim­ited to how many bed­rooms you can fit in the new dwellings.

“When you start to de­sign a du­plex on a lot less than 600sqm, then cer­tain things have to give. You’ll com­pro­mise bed­room sizes in or­der to ac­com­mo­date four bed­rooms, and as you get lower in the site area the du­plex will end up be­com­ing three bed­rooms,” he says.

“There are sig­nif­i­cant dif­fer­ences in re­sale value when it comes to four bed­rooms as op­posed to a three­bed­room dwelling. By hav­ing three bed­rooms, your re­turn on in­vest­ment isn’t as at­trac­tive.”

Your prop­erty must have the cor­rect zon­ing and has to com­ply with the coun­cil’s min­i­mum stan­dards

Process

To be able to build a du­plex, your prop­erty must have the cor­rect zon­ing and has to com­ply with the coun­cil’s min­i­mum stan­dards, so it pays to work with an ar­chi­tect who can po­ten­tially or­gan­ise the en­tire project for you by draw­ing up the plans, seek­ing the rel­e­vant coun­cil ap­proval and en­gag­ing the re­quired con­sul­tants, such as a prop­erty sur­veyor, engi­neer or land­scape de­signer.

Although there might be cheaper al­ter­na­tives, Ge­orgiev says that hir­ing an ar­chi­tect is im­por­tant to en­sure that your de­vel­op­ment is built well. The quick and easy ap­proach mar­keted by cer­tain de­vel­op­ers might sound ap­peal­ing but can present you with a host of prob­lems down the track.

“Poor qual­ity can pro­vide un­wanted and dis­ap­point­ing on­go­ing costs. Cur­rent ap­proaches to project de­liv­ery have short-cir­cuited tra­di­tional ar­chi­tect-ad­min­is­tered build­ing con­tract checks and bal­ances,” says Ge­orgiev. “Be­ware of the ‘pack­age deal’ or ‘off the plan’. There is ev­ery point in en­gag­ing in a process that de­liv­ers value for money by be­ing in­volved in the process, from the time of set­ting a brief to the time of liv­ing in your dwelling.”

Be­fore you even be­gin to build your du­plex, you should ex­pect to face a range of large costs. Man­sour says the pre-de­vel­op­ment phase will cost roughly $20,000 to $40,000, which in­cludes coun­cil ap­pli­ca­tion fees, long ser­vice levies, dam­age de­posits and other costs.

Ease­ments

If you’re won­der­ing if your block is ap­pro­pri­ate for du­plex, sewer and stormwa­ter ease­ments are the first thing to look at. Slop­ing land can be a huge prob­lem, with Man­sour sug­gest­ing that the cost of devel­op­ing these ease­ments might be enough to end your du­plex dream, es­pe­cially if you’re in­ex­pe­ri­enced.

“Sewer ease­ments can be built over but could cost any­where from $2000 to $15,000, de­pend­ing on their lo­ca­tion,” he says. “Stormwa­ter ease­ments are a prob­lem. You can’t build on top of cer­tain ease­ments and you have to stay a cer­tain dis­tance from them, usu­ally 1.5m, but this varies.”

Con­struc­tion

When it comes to con­struc­tion, the process may in­volve a full or par­tial de­mo­li­tion and re­con­struc­tion of your ex­ist­ing dwelling, which if you have to re­build a kitchen and bath­room – the most ex­pen­sive rooms in the house – can be ex­tremely costly in it­self.

Man­sour says that de­pend­ing on size, the con­struc­tion of a du­plex in Syd­ney will vary from $750,000 to $850,000 for a stan­dard brick ve­neer con­struc­tion, ex­clud­ing pre-de­vel­op­ment costs. It’s a sig­nif­i­cant cost to bear up­front be­fore any cap­i­tal gains are re­alised, so it’s some­thing you’ll have to fac­tor into your bud­get.

Ad­di­tional costs to con­sider in­clude land­scap­ing and ar­chi­tec­tural de­sign.

“Other things to look out for would be large trees, which may not be ap­proved for re­moval and could af­fect de­sign,” says Man­sour.

“Costs can keep go­ing up, de­pend­ing on qual­ity and fin­ishes. Aim for a min­i­mum of four bed­rooms, good­size kitchen and liv­ing ar­eas.”

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