Should you build a duplex to create equity?

Aside from letting the investor maximise the potential of the land, this strategy will also not require subdividing—an advantage that will reduce build costs, lower stamp duty, holding fees, insurance costs, and council rates, eliminate strata fees, and increase tax depreciation. Most importantly, building a duplex gives a property investor the ability to build equity and get high returns on his investment.

Here are two things to remember when considering this investment strategy: 

The negative: High financial commitment

Since duplexes are positively geared investment—with a high growth and a high yield—it will entail higher financial commitment compared to purchasing existing properties or individual house and land packages.

“A duplex is a positively geared investment with the potential to create equity in a calculated way,” Nidal said.

In most circumstances, you get what you pay for, so avoid buying an asset solely because it’s the cheapest option. To be able to build and hold a duplex, you must be capable of covering a 20 per cent deposit. A lower deposit may create a higher risk. You are also expected to be able to service a large loan.

Take time to meet with your financial team and discuss your options regarding financing, as well as the best areas for the implementation of this strategy—places with consistent population growth and housing shortage.

The positive: Save time and achieve high-interest return

This strategy is best for property investors who are time-poor but still wants to invest smartly because it gives them the ability to fast track their wealth creation through different options, including renting out the properties, which creates an ongoing high-interest return.

As this is quite a complicated investment strategy, property investors naturally seek help from experts and professionals, consequently letting them save time and avoid mistakes. 

Once you have decided that building duplexes to create equity is the best strategy for your property portfolio, the first step you should take is to meet with an advisor to understand your financial capacity as well as the tax implications of your decision. Then determine your goals, take time to research and develop a plan of action, and make it happen.