With Dual Occupancy and multigenerational living arrangements on the rise in the last few decades, many people are considering building a duplex, townhouse or unit. Whether it’s to live closer to family members while still maintaining independence or to capitalise on the growing demand rental market, there are a variety of reasons to look into dual occupancy options. But the big question is what building design is best for you and your needs? In this article we’re taking a look at duplexes, townhouses and auxiliary units, examining the pros and cons of each thereby providing you with the information to make an informed decision.
What are the key differences between duplexes, townhouses and auxiliary units
Potential rental income
Buying a duplex is basically like purchasing two units in one deal. This provides the opportunity for you to rent out one of the units while living in the other. The rental income can help you pay off loans and eventually, become a nice way to earn extra money.
Townhouse owners and unit complex owners will often rent out the entire building to tenants. More tenants can mean more money, but it will also mean more maintenance and the possibility of a higher turnover in tenants.
Remember, you can only make a rental income while you have a tenant. This may sound obvious, but the point we’re making is that maintenance, property taxes and other costs won’t disappear while the living space is empty. During these periods you’re going to take a loss, so it’s best to rent your space out as soon as you can.
Home maintenance costs
If you are the landlord of a duplex, townhouse or unit, you will be legally responsible for the upkeep and maintaining the property. This will include taking care of reasonable repairs and taking care of shared common areas and outdoor space. For any repairs you’re not comfortable performing yourself, you’ll need to look up qualified handy people who can take care of it for you. At the very least, we recommend having a trusted electrician, plumber and general handyman. Whether your tenant’s rent covers essentials like water will be something you need to outline in the contract.
Privacy
An attached living will never provide the privacy from your neighbours that a detached single-family home will. Whether this is an issue will depend on a variety of factors including soundproofing, who’s living next door and how loud your activities are. Many people live in units and barely know their neighbours are even there. Both options involve living close to others, so privacy could potentially be an option in both cases.
Duplex
A duplex is two separate units build close together, usually next to one other and usually sharing a common wall with one or more walls and sometimes one roof. Though the houses are attached, each of the two dwellings has separate entrances. They’re an increasingly popular real estate investment, especially in larger cities duplex owners either use the space for extended family, as a rental home or with the intention of selling.
Pros of building a duplex
Added Rental Income:
The most popular reason people build a duplex is for the rental opportunity it provides. Whether the homeowner wishes to live in one unit and rent out the other house to help pay back the mortgage faster or put both houses attached on the rental market, duplex owners have a few viable options up their sleeves.
Options with title
Duplexes offer a few options when it comes to ownership. Both houses can be individually owned under one title or separate titles. There are pros and cons to each. If you want to sell one of the houses, you’ll need it under a separate title.
Less Stamp Duty:
A big advantage of building a house over purchasing a pre-existing home is the money you’ll save on stamp duty. Stamp duty is placed on transfers of previously owned entities, so when applied to blocks of land, this could be tens of thousands of dollars.
Option to sell the second home
Provided you don’t mind living in the same structure as someone else, you can make some money selling one of the houses to someone else.
Accommodation for family members:
With multigenerational living situations becoming more popular than ever, a duplex allows loved ones to live close by while still maintaining independence.
Cons of building a duplex
Finding the right block:
This issue could stop you in your tracks before you’ve even begun. For a duplex, you’ll need a block of land to accommodate a duplex, which will be bigger than the average house.
Approval can be a complicated (and pricey) process:
You’ve heard the saying you’ve got to spend money to make money? That’s going to be the case if you choose to build a duplex. Along with needing development approval, you may need to hire town planners, surveyors and other contractors to organise the logistics of subdivision and sort out
Townhouses
Townhouses are identical-looking homes that are connected in a row (in fact, they’re sometimes referred to as row houses). Unlike apartment buildings, townhouses have their entrances and aren’t interconnected by hallways.
Pros of Building Townhouses
Rental income:
Townhouse owners can use their purchase as an investment property and rent out their town home. As with any successful rental property type, some savvy and research will be required, but when done well, it can be a nice little money earner.
Affordable
One of the big appeals of a townhouse is it is usually more affordable than a regular house. This can be great news, especially for those looking to live close to the city or those buying their first home.
Space
Compared to an apartment, a townhouse provides a lot more space. Great news for larger families or those who want some extra storage space.
Cons of Townhouses
Less value than a house
If you plan to sell down the line, you won’t get the same price for a townhouse as you would for detached houses. The value is unlikely to rise as quickly either.
Less private yard space
Townhouses may have small front and back yards, but not to the same extent as detached houses. This can be made up for if there are parks or nature areas nearby.
Body Corporate Fees
If you own townhouses or a unit complex, you’ll likely have to pay body corporate fees, which in South East Queensland average out to between $3,000-5,000.
Auxiliary Units
Pros of units
More affordable
There’s a real market for units as they’re more affordable than buying a house. When purchasing a unit, you won’t need to borrow as much money, which means lower weekly repayments. Units can be a great entry-level into the property and rental market.
Potentially higher returns
Due to units being more affordable, they’re a cheaper option for getting into the rental game. Rental yields for units have been rising for units, especially in in-demand areas.
Less maintenance
A smaller area means less upkeep for both the tenant and the landlord.
Chance to be in locations a house can’t be
For those who want to be in the thick of the action, apartment buildings are a great way to live in the city. Safe dwelling units in the city will be in high demand and can turn a tidy profit,
Cons of Building Units
Little (if any) outdoor space
Unit complexes rarely have any yard space and it’s even rarer to have private yards.
Unlikely to increase in value like a house will
Though units offer a chance for a quick turnaround with rental yields, most units don’t have the resell potential of a house. The sheer amount of units close to the city
Not all Units are created equal
Just like all houses aren’t the same, comparing units to one another can be a real apples and oranges situation. A unit in a complex of three is a completely different investment to
Our top tips for building a new home
- Consider why you’re building the house and keep this in mind when making decisions. For example, building a home for yourself and loved ones is a completely different prospect from building for prospective renters.
- Before purchasing a block, check with the local council that you’ll be allowed to build your desired project in the location.
- For those looking to rent, research areas for a viable location. Some attractive features would include low crime rates, nearby schools, amenities and public transport. Whenever considering land as an investment property consider
- Choosing the right block for a rental property is more difficult than it first appears. First, you need to purchase in a location people are going to want to rent in. Second, you need to find a balance between how much you spend on the property and how much you’re likely going to make from renting. The last thing you want is to spend more than you can realistically make back.
Get free advice from an experienced building broker
Whether you’re looking to dip your toe into property investment, or you’re considering dual occupancy options for your family, it never hurts to have some expert advice on your side. That’s where Buildi comes in! We’re a building broker who’s all about providing power to the customers. As client advocates, we’ll stand in your corner and ensure all your contractual rights are met. So, if you want to save time, frustration and money during your building journey, get in touch with us today!
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