As with building a freestanding home, there are a few key financial basics to consider before building a duplex. The Mint Loans team advise their clients to save as much as possible towards a deposit by following a savings plan and reducing discretionary spending (non-essential purchases). “Keep in mind what you’re saving and what you’re spending on things,” says the team at Mint Loans. This is not to say that you need to completely cut out spending on ‘fun’ items or activities and squirrel away absolutely everything into savings. “That’s not going to do you any good,” the Mint Loans team advises, “but just be very mindful of where the money’s going, what debts you have at the moment and what options you may have to minimise those debts before you actually go for a loan.” 

Beyond getting the deposit together, each financial strategy varies depending on your individual situation. We’ve put together three different scenarios to highlight the elements a prospective duplex owner should consider, whether you’re an owner-occupier, an investor, or both. 

Find the profile that suits your situation or pick out bits from all three to help guide you in the process of building a duplex.

Family Ties

If your intention is finding a family home to live in, your strategy isn’t just about securing a place that suits your current lifestyle – it’s about forward-planning. Moving or renovating as your needs change can be costly (not to mention stressful), so thinking ahead and planning for the future is wise.

Owning a duplex is a smart way to enjoy the lifestyle you want today while taking care of your family in the future. These days, more and more people are choosing to keep it in the family by living next door to their parents or kids in a duplex. Living in one side of the duplex while accommodating elderly parents or adult children in the other side of the property is much like having a granny flat or bungalow in the backyard – affording everyone a little privacy. 

Apart from putting a saving plan in place (and following it), the team at Mint Loans advises you minimise your credit card expenditure before applying for a loan, because lenders view credit cards as an extra expense – even if you don’t use the cards often. 

If you have a credit card and don’t need it, consider cancelling it or reducing the limit. If you have a $10,000 limit and you only use it once in a blue moon, lower the limit down to $3,000. 

First-home buyers in particular need to set aside enough money to cover the upfront costs of new home ownership. Aside from the deposit, new homeowners will need to save funds for insurance, council rates, conveyancing and moving costs.

The 50/50 Approach

Retaining one side of the duplex to live in and renting the other side out to tenants is another approach that blends home ownership with investment.

In this case, you can expect to receive a reliable source of rental income from letting out one side of the duplex while enjoying living in your own home. The increased cash flow from renting one side out means you can pay off your mortgage faster than someone who builds a standalone home.

That rental income can go towards the actual mortgage repayment so you don’t have to outlay all the repayment costs out of your own pocket.

Regardless of whether you’re investing or buying your first home, the most important factor in financing a duplex is putting together a deposit.

The finance aspect is largely driven by how big your deposit is because your deposit amount drives the interest rate and repayment figures.

The bigger the deposit, the better: with each financial strategy, the sooner you start saving, the closer you become to building your own duplex.

A Solid Investment

A duplex represents a golden opportunity for savvy investors. With two residences on one piece of land, duplexes provide investors the potential for two streams of rental income, without attracting the costs associated with buying two separate, freestanding homes.

Unlike apartment blocks, duplexes generally include more private outdoor space in the form of a courtyard or garden, which makes the property an attractive prospect for renters. Offering more freedom and privacy than a unit, and less upfront costs and maintenance than a standalone home, duplexes are the happy medium many investors are seeking in an increasingly unpredictable market.

Alongside saving an adequate deposit and reducing debts before applying for a loan, the Mint Loans team recommends investors in duplexes consider all options to ensure they get optimal returns on their investments.

Getting in long-term tenants to occupy both sides of the duplex may appear to be the simplest option, but Airbnb and other short-term rental options can maximise your financial returns, especially if your duplex is in a good location.

Investors may end up getting an even higher rate of return based on periodic, seasonal renting as opposed to having someone in there for a full 12 months.

Renting out the property in this way can make a big difference in how fast you pay off your loan and ultimately start to make profits from your investment. Setting aside enough funds for landlord insurance, real estate agent fees, repairs and other costs associated with being a landlord should also feature in your financial plans.