Why you should NOT buy dual key homes

I'd never say no to taking your money if you were willing to pay. But my whole program would be 'do your own research' and do what works for you, not just what some other tells you is good or bad. Myself included. Don't believe absolutes. There are pro's and con's to everything. The key is simply to make sure you have your eyes wide open before you rush in, with any purchase.

And damn, now I gave away all the content without first collecting the money...

 

This is not true - any valuer that attends this property and sees two kitchens will not value it as a single property and the lender will not view it as one either.
I've seen this multiple times when financing these.
Sounds like your property isn't a council approved dual key though? Did someone just put an extra kitchen and laundry, dividing wall in as a renovation to the existing single house, is that correct or have I read that wrong?

Gross rental yields are capped at 6% (on lender servicing calc) so they can help serviceability only so much.

Sorry you think I'm being condescending (that's your opinion BTW) it was not my intention, you've taken my post so personally and assumed so much.

 

Having just recently purchased this property and gone through a local broker here, we had zero issues at all with gaining finance for the property. None of them batted an eyelid, certainly not the lender we ended up going through.
They just treated it the same as they would any property with a granny flat attached.
Keeping in mind we puchased as OO not investor.

But if the lender did consider it a dual occupancy, I fail to see how that would hinder the financing of said property. People purchase dual occupancy properties all the time. It's only if the purchaser is relying on the extra rental income to be factored in, which wouldn't be anyway if there is a 6% ceiling like you claim (although no lender I have gone through have every capped any of the rental yields on any of my previous applications at 6%. They have all used a percentage of the actual / projected rental income towards servicability.)

I also fail to see why you believe valuing it as dual occupancy would be worse then valuing as single occupancy, when the value coming back from the bank is the still hits the sale price anyway.
Valuation just needs to be the same or better then purchase price to get the loan.
Again, it was an complete non issue for us.

I do not see why the lenders would treat this property different for us then for any other purchaser.

And yes, it is my opinion that you were being condescending. Just as it was your opinion I was overreacting. Funny how when someone feels they are being condescended to that they have a reaction....

 

I have looked at a couple of dual key properties in my area and have noticed they take a long time to sell.

 

Dual Key and Dual Occ.... two very different beasts in the eyes of banks and valuers.

Dual Key - often there are problems with banks and valuers

Dual Occ - absolutely acceptable security with every bank and every mortgage insurer, right up to 95% LVR

Whats the difference? Its all in the design. While the concept is the same - 2 dwellings on 1 title producing 2 rental incomes , Dual Key , as the name implies , does not provide a truly independent entry point . Typically access might be via a garage or side pathway etc... whereas a properly designed Dual Occ has a proper front door and completely independent entrance of its own. Designed properly, banks have zero issues with them.

 

Dual Key and Dual Occ are very different and treated differently by lenders
Is your property a dual key or Dual Occ - does it have council approval?
Don't tell me after all this you've got a dual occ not dual key...

Lenders do cap rental yields at 6% of the property value - if you own a property returning 10% gross rent they will only accept 6% max and then shade that to 70%-80% - I don't know how you would know if they did/didn't do this unless you saw their servicing calcs?

 

Yep - dual occ's no problems, dual key = problems
Fundamental difference in property types

 

I'm understand and am completely on board with your descriptions of the differences between dual key and dual occupancy properties.

Can you please explain to me where the difficulties come in with regards to finance for dual key (not dual occupancy) properties? Does it differ, and if so how, from how the banks look at houses with attached granny flats? And does the intent of the purchaser factor into this (ie OO vs IP)? In your experience, is it an issue with all dual key properties or just certain ones?

I am genuinely interested to know. I am trying to figure out if and why we have no issues finding finance for our property, and yet am being told that future purchases will have issues.

 

Ours is dual key. We could convert it to dual occupancy, but that does require applications to council and some work being completed first (fireproofing in the roof, sealing off and fireproofing where internal adjointing door currently is, etc. Its actually not a whole lot of work required).
Both sides have full sized large complete working kitchens and laundries (although on the council plans one side it marked down as a mudroom and a 'bar'). Entry to the smaller side is via the side of the property through the laundry / mudroom or through the shared triple garage (that could be easily divided with fireproofing if made dual occ).

 

The fact that your property has a door on the dividing wall that allows use of the property as one it's likely the key difference in determining how it's treated, which would make it able to be treated as one home, combined with the other kitchen being treated as a 'bar'

 

Perhaps that is the difference? Most of the dual key ones I have veiwed both here and back in Canberra have been like that, as that is how they get around the council / government dual occupancy regulations. The landlords just lock the internal door or (illegally) get rid of it and build in a wall, after purchase.
The few I have seen without that internal door and only external access have labelled it as having an 'attached granny flat'.
Its quite possible different cities / regions do things differently depending on regulation.

 

Makes complete sense, I do believe different councils have different definitions and regulations too

 

My previous comment was based around dual-occupancy properties with a granny flat and main house.
On Facebook there are spruikers labelling House + Attached GF as dual key properties.

 

Ya..... and that can be a little bit of a problem when they go for finance sometimes, as Joe Public thinks they are the same thing.

 

Banks just dont like them.... its like student accommodation or studios or boarding houses - investors have limited lending options as they are generally considered a specialised or non standard type of security by most lenders ... so the cash flow can be great, but your pool of buyers when you exit can be not just limited, but very limited.

Dual Occ's , especially in NSW where the AHSEPP makes granny flats legal, easy to do and quite common, are a vanilla type of property. Widely accepted as "normal" by consumers and lenders alike....

People often ask me why I do Dual Occ's where I do them... and why I dont do them in other states.... and this thread answers alot of those questions. In other states, the types of floor plans builders like to use and the many and varied council issues can be a bit of a dogs breakfast . NSW is easy.

 

If that is literally the only difference, why would a developer even consider building a dual key home if it would limit the potential market and lending options? Are they saving a couple of grand on bricks by putting the doorways together and that's it? Or what other benefit/reason am I missing?

 

Fire rated, permanent walls to separate the 2 dwellings... to be honest with you, I understand why a dual key would be used for an apartment - but I cant see any sensible reason to use it for a house. Just build a proper dual occ... but as you will discover with a lot of these products - especially in SEQld where they are sold by the dozens each week, they are really just reconfigured 5 bedroom houses with an extra bathroom and laundry jammed in.... They aren't well designed dual occ's

 

I think dual keys have been bashed here when its actually certain spruikers and designers that are giving it the bad name. I believe the OP is a BA in SEQ (correct me if I'm wrong) and have seen a whole of advertising there for shoddily designed 'Dual Key' properties especially in councils where they are not allowed to be rented separately.
The designs are terrible
Builders/Spruikers/Developers asking absurd amounts based on returns (remember the second occupancy does not give a second land component)

I believe the dual keys referred to are the ones in Logan asking 5-600k for a new 3/2/1 with an attached (enter from the side) 1/1/1 with rents quoted of 400+250. Off course these are poor investments but when land is going for 200k if there is room for a well designed dual occupancy preferably duplex style then there I think it could be a good investment if the build can be minimised to around 250k (I have built with project builders for this amount in the past)

 

Ignoring other aspects, if the building costs are not 2 x single builds and you get a decent discount,
For a cashflow play i think it works.

Ive yet to hear much feedback from pms whether tenants dont like living in the kind of arrangement.

On the assumption they get a discount compared to freestanding, i would assume its a small sacrifice for a rent discount