Two properties for the price of one?

[djbarrie]

Whilst looking for a 2 bedroom apartment I recently came across a property advertised as two for the price of one. The property consists of a 1 bedder and a studio on the same title. The property is part of a larger unit block.

I am looking to buy my first investment property and so have little idea of the ramifications of this - any wisdom you could share with me would be appreciated.

How can I find out before I buy if it is possible to split this property up so that they each have their own title?

Who's permission do I need? Is it just the local council or will I also need the permission of the other owners in the unit block?

If I split them up, what will that likely to do to my strata fees?

Are there other complications involved in this kind of deal that I am probably not aware of?

thanks in advance.

 

[Collector]

You may find that the property you mentioned (2 for 1) is part of a retirment - sepp55 (over 55 development) or serviced apartment set-up.

This is so banks would lend as the total size of the property on title fits in better with there lending critera.

 

[djbarrie]

Thanks for your thoughts Collector but it is definitely not part of a retirement or over 55's village. It is just part of a normal 3 story unit block with a dozen or so units.

 

[Propertunity]

Whilst looking for a 2 bedroom apartment I recently came across a property advertised as two for the price of one. The property consists of a 1 bedder and a studio on the same title. The property is part of a larger unit block.

Yep, these apartments started appearing on the scene back in 2000 or so (maybe even before this). They are called Dual Key Apartments. The setup was so you could actually close off a part of the apartment and just rent 1 brm on its own with its own separate entry too. So you could choose to have it rented to a room-mate in their own sep. area or just open it up for a big apartment.

I am looking to buy my first investment property and so have little idea of the ramifications of this - any wisdom you could share with me would be appreciated.

No ramifications - just flexibility if you want it.

How can I find out before I buy if it is possible to split this property up so that they each have their own title?

It is not going to happen....with respect, forget about it.

 

[djbarrie]

Thanks Propertunity,

I believe you but would still like to know why it cannot happen so that I can understand the IP business better. Who makes the decision whether or not a dual key apartment can be put onto two separate titles and why are they so against it?

I would also love to hear if anyone else has had experience with a dual key property. Are they a good investment strategy?

In terms of cash flow the property looks great but I am wondering whether it will keep pace with other properties in the area when it comes to capital growth.

Thanks

 

[Propertunity]

Hi djbarrie,

How many units are in the complex?

 

[Jacque]

Thanks Propertunity,

I believe you but would still like to know why it cannot happen so that I can understand the IP business better. Who makes the decision whether or not a dual key apartment can be put onto two separate titles and why are they so against it?

I would also love to hear if anyone else has had experience with a dual key property. Are they a good investment strategy?

In terms of cash flow the property looks great but I am wondering whether it will keep pace with other properties in the area when it comes to capital growth.

Thanks

Hi DJ

Dual key apartments are generally in high rise CBD positions or holiday resorts, where their popularity is with buyers and/or holidaymakers. After all, you can stay in one portion of them if vacant and still be receiving rental income in the other. If they were on two titles, however, don't forget that you'd be paying double everything, including fees, rates etc.

Cash flow always appears wonderful on these type of "investments", usually backed up with rental guarantees. What you need to do is dig deeper into the rental history of the place, and find out what management fees you're up for, as this is where your cashflow begins to take a fall. Strata fees can be very expensive, up to many thousands per quarter (average is around $1200-2000) and the in-house management costs big bucks as well, with some resorts taking more than 50% of gross income. This is usually for serviced apartments, or short term stays. Long term rates are cheaper, naturally.

As for cg, just take a look at the sales histories of the other dual key apartments to see if the resales are solid. After all, they're hardly the type of investment you can add value to easily.

Anyway, just some thoughts- do your DD and ensure you know ALL costs before jumping into this type of investment.

 

[djbarrie]

How many units are in the complex?

9 units if you count by title. But 6 of them are dual key so 15 in total.

Cash flow always appears wonderful on these type of "investments", usually backed up with rental guarantees. What you need to do is dig deeper into the rental history of the place, and find out what management fees you're up for, as this is where your cashflow begins to take a fall. Strata fees can be very expensive, up to many thousands per quarter (average is around $1200-2000) and the in-house management costs big bucks as well, with some resorts taking more than 50% of gross income. This is usually for serviced apartments, or short term stays.

Jacque, it is not a serviced apartment so no management fees, strata is $670 per quarter and it is not zoned for short term stays only.

 

[Propertunity]

9 units if you count by title. But 6 of them are dual key so 15 in total.

Hi djbarrie,

Re: separate titles for the dual key / studios:

As Jacque said, IF it was possible you'd be paying double everything - rates, strata, levies etc.

Do you think that the profit driven developer would have made 15 units out of the complex if he could have, rather than the 9?

Yes, I think you'd have to get the other unit holders' permission. What's in it for them? Visitor parking spaces full of the cars from owners of the newly created units?

Yes, I think you'd have to get council permission or re-zoning if that was required. Good luck there.

Yes, the strata plan would need to be amended.

I've heard of ppl who sub-divide off their back yard and make it a sep. title. I heard of ppl that buy motels and strata title the rooms. I heard of ppl that buy whole unit blocks and strata title them. But I've never heard of anyone trying to get two titles out of a dual key apartment.

But I'm willing to stand corrected. (There's a lot of stuff in the world I've never heard of )