Developing: Steph Nash Building a duplex
Property owners are maximising the value of their home or investment by creating a duplex
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“Some clients of mine have previously lived in an older style house with outdated fittings and fixtures,” he says.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%.”
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
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.
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.”
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.”