Sydney - Duplex IP advantages and disadvantages?

Discussion in 'What to buy' started by houses, 11th May, 2019.

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  1. houses

    houses Member

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    Hi everyone,

    I'm looking for a brandnew duplex in Revesby area for my first IP. It seems the rent can payoff or just a very small amount of negative gearing. However a friend of my said duplex isn't preferred when it comes to investment by serious/professional investors. Can you let me know the advantages/disadvantages of investing a duplex please? Thanks in advance!
     
  2. Trainee

    Trainee Well-Known Member

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    What is the friends experience with investing and what did they think are the good and bad? Sure some investors may say buy more land content, but you may not have their resources.

    The risk is in what you are not asking. Eg why revesby and why new build? Why the focus on cashflow? Is it because you really cant afford much negative cashflow? Are you sacrificing growth given the location? Why sydney and why now?
     
    Last edited: 11th May, 2019
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  3. Morgs

    Morgs Well-Known Member Business Member

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    Buying something brand new gives you no opportunity to add value to it, and in some instances there are risks of increased supply of the same thing coming online. You are usually paying for the developer's margin - however in this market they may have made no margin due to the drop in prices in Sydney.

    On the plus side people like living in new things so rental demand should be relatively good, and you'll have strong depreciation.
     
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  4. virgo

    virgo Well-Known Member

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    One of the duplexes near me seems to have a higher turnover of tenants...........
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    How about the rest of them?
     
  6. virgo

    virgo Well-Known Member

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    What i meant to say is turnover of duplex seems to be much higher than a house
     
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  7. houses

    houses Member

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    Thanks all for your comments guys!
    Thanks for the reply, I'm feeling like I'm the very noob trainee and you must be the trainer :)

    The reason why I chose Revesby or Sydney duplex is because later on I may convert it to my PPOR and then I'll like to live in that property (because it was new and a nice house :) ). I can afford negative cashflow and I can afford a bit more, say 1.2m.

    So my question still remains, why do other investors prefer bigger land but older house?
     
  8. houses

    houses Member

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    Thanks for the reply, I guess I'll have to chose either negative gearing but growth or good rental income but less growth?

    And does duplex really have lower growth rate?

    Thank you!
     
  9. Trainee

    Trainee Well-Known Member

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    The general rule is that land appreciates and buildings depreciate.

    You buy a new house. You are paying what it cost the builder to build it plus profit. Usually max house to land value. You buy an old house, the building is less than replacement cost. Lower house to land value. See the general rule.

    Why rent it out if you want to live in a new place? Go buy a new place and live in it. Dont rent it out for a year or two to trick yourself into thinking its an investment.
     
    Last edited: 12th May, 2019
  10. Morgs

    Morgs Well-Known Member Business Member

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    Lower growth rate compared to what?
     
  11. dabbler

    dabbler Well-Known Member

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    Better than the granny flat idea IMO....
     
  12. houses

    houses Member

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    Thanks for the explanation on house to land value, really appreciate it.

    For me atm I somehow like to live in a new house, however I can't afford a new house on a big land, therefore I'm looking into a new duplex. I think in a few years time I may move to another area, even not Sydney so I then rent the duplex out. My naive thought is a brandnew 2b apartment could cost 700k, I just think with 200k more I can buy a 5b duplex, which still has land and more bedrooms in case I need to rent it out.


    I meant does duplex has lower growth rate than a house?

    Can you elaborate more on this comment please?
     
  13. dabbler

    dabbler Well-Known Member

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    I thought you meant building or buying a duplex (having both)

    If it is 700 for a small unit, I doubt 200 with buy a decent duplex with decent land in same area ?
     
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  14. Morgs

    Morgs Well-Known Member Business Member

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    There is no hard and fast rule - but if you're talking about buying a brand new duplex which has ability for you to add value to it, versus a large block of land with an old house and potential future development opportunity then the growth prospects are very different.

    There is more much headroom for growth in the later e.g. value add, development, etc.
     
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  15. Trainee

    Trainee Well-Known Member

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    Not that simple. 2 bed units and 5 bed duplex have separate markets. 2 bed in a more convenient area might rent easier than a duplex in an outer area where you are actually competing with houses.

    Mixing own place and investment has problems. If you were buying solely for investment, would you still buy new?
     
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  16. houses

    houses Member

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    Gotcha. It seems I'm against the other when I prefer a duplex to live in. However for investment I guess I'll have to follow the majority.

    I'm buying solely for investment for sure I'll buy old house.