Duplexes are sometimes the forgotten and least-understood segment of the property market, baffling both owner-occupiers and investors alike.
The idea of buying a house at half the price, with the added bonus of having land, seems too good to be true.
Brooke Flint, buyer’s agent with Flint Property helped unravel the mystery behind duplexes on Auction Day and shared the pros and cons of buying this kind of property.
A duplex is essentially two properties on one deposited piece of land with two separate titles and stratas that can each be sold independently. A Torrens Title house, by contrast, is a freehold property.
Flint said it’s “tricky to get a duplex within 20 kilometres of the city centre” and that they become more common as get to the outer suburbs.
They are a style of property that are becoming more common as councils change land zoning and increasingly are harder to find in blue chip areas.
Here are the advantages and drawbacks of buying and investing in duplexes.
Despite their relative rarity, those you can find in premium areas will allow you to get a foot onto the property ladder in your dream suburb at a more affordable price.
A duplex is generally bigger than a unit, providing a good solution half-way between an apartment and a house.
The land component included in duplexes can create a smart investment for property investors wanting positive cash flow.
The disadvantages of duplex buys can include a limited market to chose from and a lower valuation compared to a house. The smaller size of the property as compared to a house can mean cramped quarters for some, and the shared wall in duplexes means neighbours are always in close proximity.
Flint says the traps to avoid when buying duplexes are unclear unit entitlements and bad configuration and orientation.
But the biggest potential trap relates to whether or not a duplex is self-managed.
Self-managed means is that there is no strata manager that creates a system and ensures that repairs, insurance and legals are up to date.
Many duplexes are self-managed and along with the issue of unit entitlements, which is a way of measuring how much ownership each owner has. This can create issues if the respective owners of the duplexes are not on the same page.
“You usually have a 50/50 unit entitlement, so both owners get a similar right.
“If you come into dispute and the other person doesn’t think like you and isn’t economic, you can end up in court over small changes you want to make to the property or even getting maintenance done,” Flint warned.
Is a duplex a smart investment?
The most important things to look at before buying a duplex would be the title, whether or not it is self-managed, the unit entitlements and the neighbour on the other title, Flint says.
Then look at it like any other property: land size, location, potential, amenity, aspect and access to transport are crucial factors to look at when working out if a duplex is a smart investment.
“Whether they are a good investment comes down to all the principles I would look at in any property,” Flint said.
A duplex can be a smart investment for buyers wanting to get into an area or suburb they like, as they would usually be paying less for a duplex than a free standing house.
When trying to assess value of a duplex, Flint says its important to understand that you are buying a strata property, which immediately means it’s value wise is worth less to the banks.
But in terms of getting finance from the bank for buying a duplex, Flint says the banks don’t view duplexes as a difficult from to grant finance for.
“It’s exactly the same for duplexes as it is for Torrens. They take it into consideration like they would a Torrens title or apartment.”
When it comes to reselling a duplex, Flint says typically it won’t be difficult to sell there is a unique selling point about the property and it is pitched at the right level.
Darlinghurst duplex: case study
A duplex at 2/29 Womerah Avenue, Darlinghurst, in inner-city Sydney is a good example of a smart buy for buyers wanting to enter the market at a more affordable price than a house.
Flint said the area and street is home to many old terrace houses that have been separated to create duplexes.
“The downside of this one is the outside area was accessed by one of the bedrooms, so it really was a compromised space in that way.”
Despite the property’s potential shortcomings, the property was ideal for the homebuyer wanting to buy in Darlinghurst.
It sold for $1.310 million in September 2018.
“To buy a freestanding house in that street at entry level is about $1.8 million.”
To assess whether this was a good buy, Flint researched comparable sales.
“There’s a lot of those types of properties in Womerah Avenue, so in terms of research you can come up with a very finite way of valuing that property,” she said.