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Is buying a duplex a good idea for an investment or first home?

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Smart Booster Investor Bundle

Bundle your home loan and investment. Save thousands when you bundle your investment loan and home loan with loans.com.au, with rates starting at 2.24%+ for both.

  • 2.24%
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    comparison rate p.a.*

With Australia’s property market running red hot over the past two years, first home buyers and investors alike may consider turning to one of the property world’s unsung heroes - the duplex.

What is a duplex?

A duplex is a single building that has been constructed to contain two separate homes that share a common central wall. The pair of homes will either exist on one land title and be owned and sold together, or exist on separate titles and be individually owned and sold.

Each of the residences will have their own front door, kitchen, amenities, basically any features you might expect from a freestanding home. They’ll typically have a different mailing address, like 1A Duplex Street and 1B Duplex Street.

Owners of the duplex must agree to a building insurance policy that covers both homes.

When it comes to a duplex, body corporate is not usually needed, although this depends on the age of the duplex and its jurisdiction. It’s important to check relevant state and territory guidelines for duplex properties before jumping through the hoops of a purchase.

Differences between a duplex and a house

A duplex differs from a freestanding house, given a house is in essence one dwelling under a single roof. In a duplex, the two dwellings share one common roof, but are entirely separate entities with their own entrances and amenities.

Purchasing a duplex

Duplexes come in all shapes and sizes but most commonly are single storey properties, with the common wall vertically splitting the property. It’s important to note this split does not have to be equal, meaning one property could be a four-bedroom home while the adjoining property could be a one-bedroom home.

Given the duplex is two separate homes on a singular block of land, whether you purchase one or both sides of a duplex depends on the building’s title. If the duplex is arranged as a strata-title, the opportunity lies to purchase and solely own one side of the duplex. On the other hand, if the duplex is not arranged as a strata-title property, both homes must be sold in tandem.

Owner-occupier

As an owner-occupier buyer, a primary benefit to purchasing a duplex is the price tag which is often up to half of what you’d pay for a similarly located detached home. This provides an incentive for first-home buyers to break in to the property market, whilst also assisting those on a moderate budget, or anyone wanting a low-maintenance lifestyle in a premium location, such as retirees and down-sizers.

Buying a duplex as your first home is possible, however you will need to make sure you meet your state or territory’s eligibility requirements for the grant.

Read more: What is the First Home Owner Grant?

Investor

Purchasing a duplex as an investment means the potential lies in receiving two rental incomes from one asset. This is attractive for investors as owning a duplex means you’ll be able to earn almost as much rental income as you would from two detached houses while potentially saving thousands on land costs, as a duplex requires much less land than two detached houses.

Pros and cons of buying a duplex

As with any significant purchase and given the state of Australia’s property market, it’s important to weigh up the pros and cons of purchasing a duplex before committing to a sale.

Pros

  • Location, location, location: Most first home buyers have a dream location: a suburb that they’d love to live in, if only they had the money. A duplex can be the key to accessing that location on a first home owner budget as half of a house comes with half of the price tag. However if you are buying the full duplex, this perk may not apply as the purchase price will likely match that of freestanding homes in the area.
  • High-growth and high-yield: Owning a duplex in its entirety and renting both properties paves the way to earn two income streams and achieve positive cash flow and high-interest return as an investment over time.
  • Tax breaks: Tax depreciation rules means, as an investor, you can claim depreciation on fittings in the properties. With twice the number of fittings, you could have considerably more tax breaks. When considering tax benefits of owning a duplex consult a qualified financial or tax advisor to determine whether these can be achieved.
  • Dual-living capability: Buying a duplex means you could live on one side and rent out the other. Alternatively, you could rent out both for more income.
  • Privacy: When compared to apartments, you usually won’t have your own yard, and you could have neighbours on all sides. In a duplex, you’re only sharing with one neighbour and you have access to your own features without the need to share.

Cons

  • Configuration: With a duplex, you will typically share a wall and a roof with your neighbour, which gives you a few things to think about. If you’ve got noisy neighbours, having a shared wall may drive you crazy - particularly if you are working from home.
  • Limited availability: There is not a huge number of duplex properties available to buy, due to differing council rules and regulations nationwide.
  • Duplex costs: As you have two properties, you could be subject to double the costs of maintenance, water and other household expenses. If the duplex is strata titled, you may also have to pay two sets of council rates and insurance bills. Some duplexes (but not all) might have body corporate fees as well.
  • Titles: Depending on the structure of the duplex, this may affect its resale price tag, as one title limits the market to owner occupiers and investors.
  • Renovations and insurance: Before you can crack open a can of paint, you'll need to get approval from your neighbour if you want to make changes to the external facade or any common areas of the property. You will also need to agree on an insurance policy that covers both dwellings.

If purchasing a duplex sounds like a great way to break into the property market or diversify your property portfolio, check out our range of low-interest home loans for both owner occupiers and investors.

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About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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