A dual occupancy property is something you may want to consider, not just as a property investor but also as a first home buyer. This is not a new idea but …
… it is one that is being picked up more and more by property investors around the country.
Over the past three years, lenders have been progressively tightening up on their serviceability requirements. Broadly speaking, serviceability is defined as the ability to meet your loan repayments based on the amount you are borrowing, your income, expenses and other commitments. There’s a lot more to it than that…a lot more, which is why more and more people are starting to think outside the box when it comes to purchasing property. A dual occupancy property for example is something you may want to consider, not just as a property investor but also as a first home buyer.
I believe chasing capital growth (versus chasing rental yield) is the quickest way to generate substantial wealth. However, if you are coming close to hitting your serviceability wall, a dual occupancy dwelling could be your next best property investment.
Leading by example
There is this mortgage broker that I know who lives in Canberra. She purchased a renovated 3 bed house with a double garage and a double carport on an 870sqm block. The back yard was enormous and apart from one tree in the far corner, it was empty… except for the parcels her dogs left for her out there every day.
This mortgage broker’s mother moved back to Canberra from New Zealand and was looking for a property in the same vicinity, which meant taking on a substantial mortgage. To cut a long story short, daughter suggested building a dwelling in her back yard. Mother put in the funds to make a second dwelling possible, and the rest as they say is history. The 2 bed dwelling is 80sqm with a 10sqm covered deck. It has it’s own private entrance and is fenced for privacy from the main dwelling.
The mortgage broker still has a large block of land in a growing Canberra suburb, but she also has two future potential income streams. The properties are stand-alone and each has their own gardens, power and hot water supply. It was set up this way on purpose and although mother lives there now, the potential to rent both properties out in the future was top of mind when the property was built. As an added bonus, when daughter’s new mortgage broking business is established enough for daughter to cut back on her hours and have kids, mother is next door to help out. Clever mortgage broker!
This may not be for everyone but combining financial resources can benefit all those involved, particularly if the property is large enough to accommodate two dwellings while at the same time granting both occupants their own space and privacy.
So for Canberra clients, talk to me if you’re looking for reputable builders, landscapers, garden designers or someone to project manage your renovation. For all my other clients, I hope my story has given you some food for thought.
What are the options for first home buyers?
For first home buyers in the ACT, a dual occupancy property may be an option that has been out of reach until now. As of the 1 July 2019, ACT first home buyers won’t have to pay stamp duty for established dwellings. This would be a savings of $12,800 for a $500,000-value established property.
At the same time, the $7,000 First Home Owner’s Grant (FHOG), which is currently only available for brand new dwellings, will be canned. If you are looking to buy brand new it might be worth buying now so that you can get the FHOG as well as the stamp duty concession.
For first home buyers wanting to buy an established dwelling, you might want to wait until after July 2019 so that you can get the stamp duty concession. To be eligible, your household income will need to be less than $160,000 and there will be thresholds on the purchase price.
It will be interesting to see how this affects Canberra property prices next year. Those properties in the $400,000 – $600,000 price bracket may have a larger market now that first home buyers will be incentivised to buy established. If you’re a property owner in Canberra with a property in this price bracket, you could see some capital growth this time next year.
Feel free to contact me if you have any questions about stamp duty and/or dual occupancy properties.