In A Duplex?
Why Invest In A Duplex?
It is our belief that a duplex, or development project, is the only reliable way to see a substantial development profit and a positive cash flow in the current market. When purchasing property for investment it is safe to say that investors are looking for two key attributes – capital growth and return on investment.
Capital growth is predominantly created when the value of a property increases due to demand for housing in that area increasing and/or availability of property decreasing. You can not control this and you can only take an educated and very well researched guess as to when it will occur. When building a duplex you are essentially taking a single block of land, adding 2 houses, cutting it in half, and thus creating a development profit. A majority of the capital growth is created by the now 2 combined land values being higher than the original purchase price of the land.
With Duplex Invest you are not waiting for capital growth – you are creating it!
Another option for capital growth is to improve on an existing property by adding to it or renovating it. A significant delay in a project, be it from council approvals, an unforeseen building issue, or just lack of materials and trades, can quickly eat into your profits. If you watch primetime television (The Block, Renovation Rumble etc.) you can see the huge amount of work involved, as well as the potential pitfalls you face. A majority of our clients simply do not have the expertise, or more importantly the time, to undertake a renovation project. A duplex is as complicated as a standard construction, however if it is managed properly and efficiently it will be a feasible and rewarding process.
Duplex Invest Provides These Key Elements In All Duplex/Development Projects:
- Fixed price turnkey contracts
- Specified and enforceable time frames
- Oversight of Construction and the Builder, and much more.
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Cash flow is the total amount of money being transferred into and out of a business. In this case the business is the property investment. Cash flow can be separated into 3 categories:
- Negative cash flow The property makes a loss and has holding costs.
- Neutral cash flow The property breaks even
- Positive cash flow The property makes a profit and shows a return
With interest rates being as low as they are many standard properties are now sitting around the neutral cash flow mark, while more expensive properties are generally still quite cash flow negative.
However, it is very important to remember that eventually interest rates will increase back to their historic average of approximately 7%. At this point a majority of standard properties will return to being cash flow negative or even extremely cash flow negative.
Investors need to consider how they will cover these extra costs. Negative gearing will only see around half of your losses returned through tax deductions. This is where a duplex comes in.
A duplex provides 2 incomes under one roof and in most cases has positive cash flow!
Obviously having 2 incomes is better than one, but this will also provide you with financial security. If, for example, you have one side of the duplex vacant for a few weeks you are still receiving rental income from the other side.
Based on our previous projects Duplex Invest sees an average of 7% rental return or higher. This is a substantial cash flow positive return.