Hi there, my name’s Ben Everingham and I’m the director here at Pumped on Property. In today’s video, we’re gonna talk about the brand new dual income options available in South East Queensland right now.
G’day, my name is Ben Everingham, and I’m the directory here at Pumped on Property and in 2016, we helped clients all over Australia buy or build around about 35 to 50 million dollars worth of property in the Brisbane market. In today’s video, i’m gonna really talk about the options available in the South East Queensland marketplace right now for people interested in that brand new dual income product. Because I was having a look online and I could see that not too many people are really talking about this, not too many people are sharing stories. There are some people that are getting very good returns and very good deals at the moment and there’s a lot of people that are being stitched up by property marketers with this type of product at the moment.
I wanted to dis-spell some of the myths around this product, talk about the opportunity and really explain where you can get what type of products, so stay tuned. It’s gonna be a really content heavy video, but I hope you get a lot out of it as well. I really wanted to start off by talking about, “What is a dual income property?” For anyone that doesn’t know, it’s basically any type of property that has two incomes. A dual income property could be a house with a granny flat, if you wanted to buy an existing house and build a granny flat. In today’s video, we’re talking about more of that brand new dual income property, so it’s more … The way that we do it Queensland is it’s one big house with generally a three or four bedroom home at the front and a one or two bedroom granny flat at the back all under one roof line.
It’s completely separated. Completely separate, own backyards, own driveways, own letter boxes, own clotheslines. Completely separate dwellings, but it is built under one roof line to keep the construction costs way down because it’s a lot more expensive to build a granny flat than it is to build a house and add the secondary dwelling at the same time. What I like about dual income properties is one, it reduces your overall risk on your portfolio in the sense that … Obviously, if you’re getting two incomes instead of one, if you lose one tenant, you’ve got another one paying rent generally, especially in a market with a vacancy rate below 2%.
I also like the fact that it creates surplus cashflow and protects you against future interest rate rises. If you’ve got properties in Sydney or Melbourne or Brisbane, that are negatively geared, dual income properties can provide you, if you buy them at the right price, with a surplus of income before tax, which means passive cashflow. They’re great options to hold longer term as well in the sense that it’s a brand new property, good depreciation and relatively low maintenance. There’s a heap of reasons why I like them. I’ve personally got three dual income properties in my portfolio. I’ve built one of those brand new and the other’s are existing houses where I’ve built granny flats.
Love the cashflow, love all of the things about those types of properties and I suppose the longterm picture for those types of properties is because the yields or rental returns on those types of properties are generally between 6 and 7%, you end up getting a much better cash return on your investment and they’re the ones that you kind of want to own outright in the future to give you that financial independence that you’re looking for. That’s my logic with why I’ve gravitated personally towards that type of product. One thing you need to be careful with in South East Queensland is … Or what you need to be getting your head around is the different local council laws or policies around dual income products.
There’s seven or eight different councils in South East Queensland. In the Gold Coast, you can legally build a dual income or you can build a secondary dwelling, you just can’t legally rent it out. Which means effectively, if it’s not to somebody in the same family unit, you can’t actually legally rent that out and that’s the same as Brisbane city council where, again, you can legally build a granny flat or a house with a secondary dwelling component to it, but unfortunately you can’t legally rent it out, which kind of completely negates the reasons. So, be very careful around spruikers that are talking about dual income property in the Gold Coast or Brisbane because as of right now, 2017, that product doesn’t really exist because you can’t legally rent it out.
There’s plenty of other options around South East Queensland where you can and so … I know you can in the Logan area, which is South Brisbane. I know you can in the Ipswich area, which is sort of west in Brisbane. In North Brisbane, which is the Moreton Bay regional council area, you can. The cool thing about Moreton Bay is there’s some suburbs which are literally only ten kilometres from Brisbane CBD in that council area where you can get an existing house and build a granny flat or a vacant piece of land and build a dual income property, which is kind of interesting.
As we go further north, you can also build dual income properties on the Sunshine Coast, so there’s a couple of different options, but making sure that you do your due diligence before you buy a piece of land if that’s your intention or before you buy a house hoping that you can put a granny flat on it and just making sure that you cover your backside and do your due diligence before you decide to settle on the land or before you buy the property.
There’s a range of different options or stars when we’re talking about dual income property. Today, we’re going to be talking about buying an existing piece of land or a vacant piece of land and then building a dual income property on it. They can be single story, they can be double story, they can be like a three bedroom, two bathroom home with a one car garage with a one bedroom, one bathroom granny flat and one car at the back. They could be four or five bedroom, two or three bathroom home with a two bedroom, one bathroom, one car garage granny flat. There’s all sorts of different forms.
I personally like to buy a decent size piece of land, so when I’m doing dual income properties in South East Queensland, because Queensland is so hot and because it’s an active outdoor environment and people value that, I like to make sure that the land size I’m looking to acquire, whether it’s in South Brisbane, Western Brisbane or North Brisbane or even further north on the Sunshine Coast, I’m always looking for a piece of land at least 400 to 600 square metres. There’s other people that have different opinions on this, but we all know that over time, capital growth is built on land values rising and so the bigger the land component, obviously, generally, the rule of thumb over the last 50 years in this current market is prices will grow with a better land component in the right area.
I’ve got some thoughts, personally, which I’m gonna share in this video, and take them with a grain of salt. They’re not right and they’re not wrong, they’re just my personal opinion. I did not like any dual income property out in Ipswich, in fact, I really disliked the Ipswich area. Personally, I see too much brand new dual income property going into South Brisbane, in the Logan area. That council is very pro-development, very aggressive and I find there’s heaps of shitty, ridiculously average product being sold by property spruikers, financial planners, accountants and property marketers in Sydney and Melbourne selling people into these amazing dual income properties in the Logan area, which I think are just, to be honest with you, dog shit.
They’re going to perform extremely averagely over the long term and all of them are overpriced that I’ve seen. Unless you’re going direct to the developer and getting the land and then testing the market and finding the best builder who will build the best quality product at the best price for you, but unfortunately most of these marketers and spruikers are getting anywhere between 15 to 70,000 dollars of undisclosed commissions from the developers and the builders that they’re working with, which to be honest with you, makes me sick, so be very careful in Logan. I think there’ll be an oversupply issue at some point soon.
I personally, really do like the North Brisbane region, so there’s two different options, I suppose, if you’re looking for land, you can buy it in green fielder state where there’s other new pieces of land or new development coming on, or you can alternatively just find an existing block in a great suburb and build something there which is my personal preference. But that North Brisbane, Moreton Bay Regional area has some good opportunities at the moment. The land prices are still relatively low. The building components costs in South East Queensland at the cheapest anywhere in Australia because it’s the most competitive market in Australia. There’s the most big builders in Australia in this one market. You can shop the market yourself or you can reach out to someone like me and I can introduce you to some of the guys that I’ve personally used for myself and with other clients and can save you a bit of money from that perspective. Either way, just be careful.
The Moreton Bay regional council goes, as I said, from sort of ten kilometres from Brisbane, right up to just before the sunshine coast and there’s plenty of different options. I personally like property where I can also get capital growth, not just cashflow. That means buying closer to the city or directly in the beach side suburbs closer to the water. You might pay a tiny little bit more in the short term, but longer term because you’re getting growth and a great yield, it can be a really interesting option to consider.
I wanted to share some current examples of things that we’ve done with clients recently. On the sunshine coast, there was a developer that was in a distress situation that overcapitalised themselves on their current project on the coast for something that they were doing on the west end in Brisbane, some units, and needed to get rid of the last five or six lots in this estate, which was a newer estate of about 50 properties. We picked up 800 square metre blocks of land at a very good price and then put a three bedroom, two bathroom, two bedroom, one bathroom dual income property, which we built from scratch, brand new one. Each of the pieces of land for our clients and I think the total cost was somewhere around about the 450,000 dollar mark. They’re currently renting for 650 to 680 dollars per week.
The yield is well above 7% which is great. Those blocks, because we bought them so cheap are being revalued 12 months down the track after construction for around about 550K. Those clients have made around about 100,000 dollars in capital growth, plus they’re getting an amazing yield. They’ve got a low maintenance property and they’re also obviously getting an amazing cashflow return or depreciation return as well after tax. That kind of option’s available and definitely worth considering. It’s not something that the average person generally finds for themselves, but that opportunity through working with someone like me may be available.
There’s another option in North Brisbane at the moment. About 28 kilometres from the city, right near the beach in a really strong area where train lines have just opened, universities are just opening etc. etc. Close enough to the city and the beach to receive long term capital growth, but still affordable in terms of price point, so again, it’s not a full new development, it’s just one street where there’s some lots still available and we’ve helped clients get in there for about 470,000 dollars on 400 square metre blocks with a three bedroom, two bathroom, one bedroom, one bathroom granny flat.
We basically just helped these clients. We’ve just handed over the first one and that’s now renting for 565 dollars a week. I think once the street’s completely constructed and people know what they’re buying and what they’re going to be living in, you’re gonna be looking at around about 580 dollars a week rent. Again, because of the property marketers and some of the other people that have been building stuff in there for their clients and themselves, they’re buying the same people or other people in the street have been paying about 530 to 550K, so, again, there’s a bit of an equity upside. My philosophy is always, “If you can get your deposit back as soon as possible, or you can manufacture some equity, it reduces your risk.”
I’m sorry if I’m rushing through some of this stuff, but there’s been some really cool recent examples of things that we’ve helped clients with. In terms of some other questions that people have around dual income property, generally, the two builders that we’re working with in South East Queensland are building this type of product in between 12 and 16 weeks. Generally, after you’ve settled on the piece of land and it’s yours, at the moment, you’re looking at between four and sort of six weeks to get certification and council and then another couple of weeks to a month for the builder to schedule the job. Then once the builders started the job, as I said, it’s about 12 to 16 weeks. It’s kind of about a six month process end to end. From the time you find the land to the time you’ve got your first tenants in.
As I said before, I like 400 plus square metre blocks of land. I think it’s really important. I also think it’s important to get capital growth as well, which means buying a high quality piece of land in a better area or a better estate just so you can get that capital uplift over time as well as your return. The types of returns that you can expect at the moment from this type of product obviously depend on what you’re buying and where you’re buying it, but you’re looking at rental returns of anywhere between 5 1/2 and 7% plus to be easily achievable right now. Short commute to the city in really high quality areas. I think that’s kind of a good starting point.
Today’s video has talked about a bunch of different things. I personally love dual income property. Building brand new is not for everybody. There’s pros and cons associated with it. If you’re not interested in building a brand new dual income property, but you like the idea, you could potentially look at an existing property where you build a granny flat, but what I wanted to share is that there are great yields currently available in the Brisbane marketplace and I think for those people that are savvy, that are prepared to do a little bit more work or prepared potentially to partner with someone like myself, there’s options available to not just make some short term money on the way in, but to get a great yield and longterm capital growth and kind of have a property that meets a bunch of the things that are important to me as an investor and I’m sure are important to you as well.
I really appreciate your time. For anyone that’s interested in learning more about dual income properties or talking about the options in the market in more detail with me, I’d love to offer you a one-on-one complimentary strategy session where we talk about the market as a whole, which is South East Queensland right now. What options you have, what you can buy land for, what you can construct, what types of rental returns you can expect and then you can go home and do your own due diligence and research. If you like that opportunity, we can help you obviously get it at the right price and project manage that entire construction process for you. Then, my Mom and I also run a property management business, so I would love the opportunity to manage the property for you after as well.
That’s dual incomes in a nutshell in South East Queensland. I hope you got some value out of today’s video.
Until next time, stay hungry.