How much does a Dual-Occupancy Development cost?
In recent years dual-occupancy developments have gained a lot of attention both as a way of building significant equity, but also for landowners looking at a way to upgrade their current home or even potentially to generate a passive income. Dual-occupancy developments benefit from the fact that not all land is created equal. Depending on the zoning within a certain suburb or even city, some areas are able to be developed to a higher density than others. That means the landowner is able to build multiple dwellings on the land if the zoning allows for it. Generally speaking, if your property has the ability to house multiple dwellings, by developing you likely stand to see a significant uplift in value by releasing that equity. For the most part, land is priced according to what can be built on it along with all the other normal factors that make a certain suburb or area an appealing one to live in. Dual-occupancy developments are often two townhouses side-by-side, one townhouse behind the other or even at times, one on top of each other.
Understanding the numbers in a dual-occupancy development
While you might be considering a dual-occupancy development, it’s important to understand that not all projects are viable. As a general rule, for a development project to be viable, the price of the land and build will need to be less than the cost of buying an established home. A good rule of thumb is that the value of the current land needs to be around the same price as what the end product might be selling for. So if your current house and land is valued at $1 million, you’d want to see new dual-occupancy properties (duplexes), selling for around the $1 million mark.
Case Study – South Kingsville
We can see how these numbers play out with a case study from Kingsville in Melbourne’s inner-west. Our analysis shows us that in Kingsville, duplex style properties were selling for around the $900,000-$1,050,000 range. The land value of the property we were running a feasibility on came in at $900,000 – so immediately it was clear that this might be a viable project to consider a dual-occupancy development. When trying to assess how much a project will cost to build and how profitable it might be, it’s important to start with the end-buyer in mind. In this example, we were looking to develop two, 3 bedroom, 2 bathroom, single garage homes, with a similar level of spec to another dual-occupancy development, Bodon Homes completed in the area at 41 Greene Street, South Kingsville.
41 Greene St South Kingsville: Builder Bodon Homes
The build costs for the construction of the two buildings was expected to come in at $700,000. What’s important to understand when it comes to building costs is that you want to get the full turn-key price form your builder, so you know exactly what everything is going to cost. At the same time, when you’re working with the designer and builder, you need to think about what the end-buyer of that home will want. That home is competing against other homes in that area and you want your new property to stand out.
41 Greene St South Kingsville: Builder Bodon Homes
Working with a builder who can produce the best quality product within the budget is important. It’s also vital to consider that spending less on some of the specs can at times be more risky because when it comes time to sell, the home must meet the end-buyers expectation for the area – or ideally beat it for the same price. This is where an experienced development team and builder with an established reputation for quality can make all the difference.
Dual-occupancy development profit potential
When the construction costs have been determined with your builder and designer, you’ll still need to factor in some other costs. Subdivision costs, town planning and design, which include things like surveying and lodgement fees with the council will come to around $52,000 in this example. It’s important to note that all councils are different and will have different requirements. The costs of demolition of the old house is approximately $15,000. Based on our comparative market analysis, it was clear that these duplex style townhouses in South Kingsville were selling for around the $900,000-$1,050,000 range. That meant the numbers on the project stacked up really well and the landowner would be able to realise a significant increase in equity or a profit if they chose to sell. That allowed the owner multiple options, which included selling one dwelling and retaining one to live in. In this instance, the new dwelling could pay for the cost of construction and the associated costs and still return a profit to the landowner. The second dwelling could also be rented out for around $520 per week, providing a regular passive income. Or both properties could be sold with a significant profit of around $300,000
Land – $900,000.00
Subdivision Costs – $12,000.00
Design + Town Planning – $40,000.00
Demolition – $15,000.00
Construction – $700,000.00
Total Development Costs – $1,667,000.00
GRV – $2,000,000.00
Profit – $333,000.00
Profit on Cost – 19.97%
Bodon Homes are experts at dual-occupancy developments in Melbourne and can help you release the equity in your land. The first step is simply to get your site assessed to see if a dual-occupancy development is viable and what your options are.
Please feel free to request a Free Site Assessment or call 13 000 BODON.
Contact Us about Dual-Occupancy today.