Duplex strategy to drive boom-time profits

By Sarah Megginson | 01 Aug 2016

Information supplied by Duplex Invest

Sydney’s rabid growth run of recent history is over, leaving many investors looking for the next best place to park their investment dollars. The better question to ask may be ‘what’ rather than ‘where’, according to one industry expert, who says duplex developments are the key to driving big profits in the current market.

“Developing a duplex is an excellent strategy for creating equity, and in my opinion it’s one of the safest [strategies] in the current market,” said Paul Bieg, director of DUPLEX INVEST.

“To create equity, you have two main options. You can wait and let the property price increase through capital growth; the down side of this is that it takes years and it is never guaranteed. Or, you can add value by developing.”

A duplex project allows you to benefit from capital growth without waiting for the market to drive price appreciation for you, he explained.

“When you take a single block of land, build two dwellings on it and then subdivide, you are creating the equity through a small and manageable development project,” he added.

“Although the land is now half the size, it does not mean it worth half the price and this is where the equity is created.”



Some investors shy away from this type of project due to the perceived hassles and hurdles, but Bieg – also a mortgage broker with 10 years experience – said financing is accessible in the current market.
“A majority of the major lenders, and some other non-bank lenders, will allow you to go to a 90% LVR including LMI, which is about an 88% LVR, while some smaller lenders see a duplex as a commercial project and will at the most lend to a 80% LVR” he said.
“On top of this, you do need to have access to substantial funds for development approvals, council contributions, charges or headworks and the eventual subdivision cost.”
These may sound like big outlays, but the potential rewards are there for those with an appetite to take the plunge, he added.
“We work with our clients to ensure there is a minimum of a $100,000 potential development profit,” Bieg said.

Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.

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