How Strata-titled Duplex Developments Can Supercharge Your Portfolio
A fundamental understanding of portfolio building wasn’t enough to help investors Paula and Denis Harris gain traction early on, but each small step led to an exciting discovery: strata-titled duplex development. They’d known value-adding was essential - as was buying under market value - and could see the power equity provided by getting them into the next opportunity. Putting those ingredients together and finding the right mix for their own circumstances, however, took much time before they hit on the “aha” moment that turbocharged their property portfolio.
Newly engaged in their early 20s, New Zealanders Paula and Denis were given a $500 cheque to start saving for a home deposit. Just 18 months later they bought their first property, fortunate to purchase under market value in what was a great start at getting their feet in the door (it turned out to be such a good buy that the now very cash flow positive asset is still in their investment portfolio 25 years later).
Replicating that success the second time around proved harder though, with the effort required to save for another deposit an unexpected stumbling block.
“That was the biggest frustration actually,” Paula says.
Even with a renovation to value-add on their first property, success was slow-going. After a period of intense research and undergoing investment courses, the couple learnt more about what other people were doing to build wealth. Discovering the possibilities offered by duplex properties was key.
Securing a duplex development in New Zealand - also bought under market value - Paula says they were blown away by the positive cashflow, receiving twice the rent they would have on a regular home. “That’s when we could start really moving on our portfolio.”
Later moving to Australia, they continued to purchase properties using the same strategy, refining it to get as much value as possible from their outlay. Just by adding study niches, for example, they were able to increase their rents by $10-20 per week.
“Now everyone does study niches,” Paula says.
It was the next step, however, that made things really take off - building and developing their own strata-titled duplex properties. The major difference, Paula explains, comes from the way the equity is assessed by the banks.
“They can be valued as two separate units.”
Now able to get anywhere upwards of $80k equity from their properties, Paula and Denis have turbocharged their portfolio. It’s not easy - and it has to be done properly or risk non-compliance - but they say investors meeting the challenge stand to reap the rewards. While some of their current projects are close to their Sunshine Coast home, others are further afield with the logistics far easier now they’ve achieved strategy alignment.
“We’re very careful with what we do,” Paula says. “We always have an exit strategy of whether we’re going to buy and hold or buy and sell.”
Mostly that entails holding, with plans to build up their portfolio and eventually sell half to help fund an independent retirement. This goal received a further boost after the Global Financial Crisis when their vastly increased equity helped them enter the United States property market where houses had become very cheap. Buying and renovating properties for rental, they’ve found values may still be stagnant but other rewards exist instead.
“We’re in the US purely for the cashflows,” Paula says.
Reflecting on their property investment success to date - kicked off by a $500 cash injection over 20 years ago - Paula says if you have a minimal deposit, then start small. Endlessly saving for the ‘big dream’ won’t get you anywhere - all that happens is that as your savings increase, so too do house prices. Instead young investors should get in to the market as soon as possible, even if it’s just with a townhouse or two bedroom unit.
“When you first start investing, buy what you can afford. That property will go up in value,” Paula says, “Alternatively, if you don’t have enough to buy a property on your own, often young people can pool their funds on a deposit for a unit and get into the market that way.”
At that point, you’ll have that much-wanted equity and then, as Paula and Denis have found, the possibilities are endless.