Dual Key in high profile area VS Duplex in lower profile area, 1M Cap

Hi,
We have been approved for 1 Million investment loan and looking to buy in NSW. We are considering dual income option and have two available:
- Dual Key House and Land package in a high-growth, high rental yield area (Cameron Park)
- Duplex in a lower socio-economic, lower growth area (Cessnock and surrounds)

Our main priority is to get maximum rent to sustain the repayments and any costs associated with the house, but of course capital growth as well.

I understand there are both pros and cons to each option. Given our budget and priorities, what would you reccommend?

thanks

 

Congrats on your pre-approval

I've been involved in many dual occ and duplex purchases and developments over the years - there are definitely pros and cons to both options.

To start with, let's look at the actual average annual growth rates (10Y):
Cessnock 6.08%
Cameron Park 4.47%

Cessnock has actually been outperforming Cameron Park over the long-term.

Dual keys will generally appeal to investors, so my concern here would be whether you'll actually achieve the capital growth you're expecting.

A duplex in the Cessnock region will generally have better cash flow and if it can be separately titled (which it should if it's a 'true' duplex), it'll give you more options in the future. You can sell them individually or sell one unit to pay down the debt on the other unit for a debt free investment.

I would personally go for the duplex option based on the general information you've provided. If you're doing the development yourself (rather than buying off-the-plan/H&L), then you should also have the additional benefit of manufacturing equity on completion.

Good luck with it all

 

Only two? Out of the entire of NSW, there's only two properties that are available for you to buy?

This sounds like some BA has given you the details of two properties. What makes either of these a great buy?

 

Have you considered purchasing inter-state? By widening your search area you could increase the number of opportunities to purchase. With a budget at the 1m mark, you wouldn't be limited to many places outside of close proximity to the larger metro markets. Alternatively, another option if looking for a higher-yielding property would be to consider purchasing a commercial. This is another market entirely but can provide great yields.