As they have a single title ownership, there’s only one set of rates and no body corporate fees. Dual income property owners are also entitled to substantial depreciation deductions.
The first is obvious; two bouts of income generally make for more income in total. Then there is the flexibility – as the owner you could live in one property while earning an income from the second.
You’ll also save money by not having to subdivide your land to maximise its value – subdividing incurs additional holding fees, insurance costs and council rates.
“You only pay stamp duty on the land portion of the purchase, saving you around two thirds of the stamp duty usually associated with buying an established property,” says Joshua Boctorani, Managing Director of AssetBase.
For example, he explains a $600,000 construction in New South Wales would cost around $5,800 in stamp duty, whereas purchasing an established property valued at $600,000 would cost around $22,800 in stamp duty.
However, there is some math to balance when deciding whether to go for dual income versus a subdivision (which will result in two properties, on two separate titles.
“As a dual income property sits on one title you will save around $45,000 of council contribution and subdivision fees, which does increase your return on the property in the initial months. On the flipside, both need to be sold as one when you choose to sell so you will need a buyer that is looking for two separate dwellings on the one title,” Boctorani says.
Boctorani says with any new property you can claim 2.5% on the value of the bricks and mortar each year for 40 years, as well as 20% of the value of plant and equipment/fixtures and fittings for 5 years.
“As a dual income would have two kitchens, more bathrooms, and more fixtures than a standard home you will find that you can depreciate more on a dual income home compared to a standard house,” he says.
Depreciation doesn’t cost you any money but with a schedule by a qualified quantity surveyor you can write off more in your tax return.
The resale value of these properties is something to look out for according to Boctorani. He says as the product is so new to the market, having only been around for five or so years, there is little to no resale sales evidence. “Therefore, you will notice that when you do sell it’s to a very specific purchaser – either an investor or maybe a family who want grandparents next door. Limiting your sales pool means that it will limit the upper range of what people are willing to pay,” he says.
He also notes yield through two income streams often comes at the expense of capital growth.
When weighing the pros and cons, seeking property advice from a qualified professional is a must. Seek advice from someone who has bought, sold and helped people acquire a number of different property types and can provide you with information based on your situation Boctorani advises.
“Speak with your mortgage broker before going and buying to ensure you are financially ready when making your decision,” he says.
Written by Melanie Hearse