Hi. My name is Ben Everingham and in today’s video we’re going to talk about how to build a brand new dual income property.
G’day there. My name is Ben Everingham and I’m the director here at Pumped On Property. We’re a buyer’s agency who help clients from all over Australia and the world, purchase extremely high quality investment properties. In today’s video I’m going to talk about something very close to my heart, which is brand new dual income property.
In the last three years I think I’ve done three of these properties myself and a huge number of these properties for my clients. That’s why I’m so excited to share a bit of an insider’s view as to the world of these dual income properties. Today we’re going to talk about what they are, where you can find them, why they’re interesting, and why you could consider building one or buying one, and how to actually go about creating one. How to identify the right state, the right market, the right piece of land, and the right builder, and how to actually manage the process simple and stress free and ultimately get yourself the right result without paying a ridiculous amount of money or paying above market value because you go through some property marketer who brings you these brand new property without charging you anything. Then later on you find out that you paid 15, 20, 70 thousand dollars more than you should have for the same product because they were taking a huge commission behind the scenes from the developer or the builder.
80 percent of all brand new property in Australia is sold through these property marketers. There’s absolutely nothing wrong with property marketers. Some of them are great guys. Some of them run fantastic businesses but unfortunately, sometimes these guys also bring really crappy product to the market place where there’s no demand for that market. I’ll give you a perfect example. I got off the phone to a client last night and she had gone through some seminars and she had gone through some of those brokers and she’d talked to a bunch of different people. She was presented with this dual income product. It was a six hundred square metre piece of land, three bedroom, two bathroom, one car garage home with a two bedroom, one bathroom, one car garage property. This was in regional New South Wales.
I think it was Aubrey or something like that or Wagga. The package was 480 thousand dollars turning key. I said, go and have a look at what they’re trying to sell you. She jumped online and she found out that the piece of land was only worth a hundred thousand dollars. I told her that you could build that product for around about 240 thousand dollar mark, which meant she was paying around about 140 thousand dollars more than she should’ve needed to, to get a product. It had this two year rental guarantee and all of this other bullshit that they sell into these packages. There’s plenty of this stuff happening. So often I hear about people getting burnt. There’s plenty of it happening in South Brisbane at the moment. There’s plenty of it happening in Ipswich. There’s plenty of it happening in the western suburbs of Sydney, certain suburbs in Perth, certain suburbs in Adelaide. This product is rampant.
A lot of this stuff is being sold into average markets where you don’t get capital growth for well above asking prices. I hate starting the video from this perspective but I think it’s really important for you to protect yourself. If you’re in doubt or need a second opinion, please throw me through a package that someone else has sent you. If you’re really at those final stages of seriously considering something and I’ll give you unbiased feedback. We don’t partner with the builders or the developers. We get paid by our clients directly. There’s no vested interest and I can really help understand what that opportunity looks like and where the market is at for you.
Let’s get started with what is dual income property. A dual income property is simple. Basically, in the olden days it was a house with a granny flat. If it’s an existing property, these days you see a lot of this stuff in the back of the property investment magazines, etc. It’s more like a house with a granny flat but it’s all under one roof line. It might be like I said before, a two or three bedroom home with a one, two, three bedroom granny flat depending on the local council area or the laws in the state and the market that you’re considering doing something like this in. It basically is built on one slab under one roof line, two letter boxes, one driveway, two separate entries. Generally this type of product is the house at the front with the granny flat at the back or the granny flat and the house side by side depending on how wide the site actually is. It’s basically two incomes from one property.
It’s not like a duplex where you can try to title it and sell one side and then sell the other side or keep one side, sell one side, or keep both. It’s more like the old house with the granny flat. You would need to sell them together at the end of the day, in the future. Until you sell the product, you’re getting two great incomes. They can reduce your risk. They can provide you with great cash flow. At the right price in the right market at the right time they can be a really interesting opportunity to consider against other things that you’d already be considering at the moment.
Why dual income property? For me, I like brand new because it’s extremely low maintenance. I also like brand new because I get land at good prices and I get the builds built through a couple of builders at very good prices. I can generally manufacture a little bit of money on the way in, because the price of the land plus the price of the house doesn’t generally, when I’m doing it for myself, equate the ultimate value on the completion of construction, so there’s money to be made if you do this right on the way in. You don’t have to be paying a premium or market value for this product. There are still deals out there in the market in Sydney, in Queensland. Unfortunately you can’t do this product in Victoria at the moment with the current town planning laws. That may or may not change in the future. Who knows? It can be a really interesting asset. As I said before, it can be great for cash flow. It can be good for depreciation if you’re earning a high income, although depreciation is at the bottom of my list in terms of importance. Capital growth, cash flow, making money on the way in, and then buying at the right time and the right cycle are much, much more important to me personally as an investor.
People that are earning good income, it can help from that perspective as well. It can reduce your risks in times of change or instability in the market place because you’ve got two people renting two separate properties under the one roof line with you. If you lose one tenant for a period of time, at least you’ve got some income coming in. You can get yields on some of these things of between five and eight percent in metro market places. The rental returns can be fantastic as well.
Again, some of the cons associated or the negatives associated with this product is a lot of it’s shit and it’s being sold by property marketers and people that don’t have your best interests at heart. You’ve just got to be very, very careful of that. The product that you’re buying, you’re buying the land at or below market value. You’re getting the build at or below market value and you’re buying the right place at the right time.
For some reason, developers buy big tracks of land and then partner with builders and build unlimited amounts of this product in some areas. So you’ve got to be careful that even though vacancy rates might be low now, what are they going to be like in three years time with another one thousand dual income dwellings? Just be careful with that stuff. Make sure you do your homework and your research properly before you even consider this type of product in any area. In terms of where you can do these things, you can do them in parts of WA all the way through New South Wales because of a blanket policy that the New South Wales Government stepped in and put over all of the councils. As long as the site complies and it’s pretty easy to find out what that compliancy is by just jumping on the New South Wales government planning scheme or ringing the local council in your area and just asking that way. There’s opportunities in parts of south east Queensland.
You can’t do it in Brisbane City Council at the moment and you can’t do it in the Gold Coast Council areas but you can do it on the Sunshine coast. You can do it Moreton Bay, which is north Brisbane. You can do it Logan, which is south Brisbane and you can do it in parts of Ipswich, which is western Brisbane. Again, this video is being shot in 2017 so things are always changing in this space. Definitely don’t take this video as gospel. If you’re considering doing this, before you buy land, absolutely make sure you get a town planning check and the town planner certifies that yes, on this site based on the current town planning rules you should be able to complete that type of project. You definitely don’t want to buy a piece of land hoping that you can do that and then not be able to do it.
You can also do this in parts of south Australia, parts of the norther territory, parts of Tasmania. There’s a huge amount of opportunity for this type of product. It means finding the right land at the right price, partnering with the right builder, and building a decent product for the market. Making sure that the market is ready for that type of product and is happy to rent it from you and there’s good vacancy rates so that’s the low two percent, so you know that the product is going to be accepted. From my personal experiences, the one and two bedrooms always rent very well in the right markets. The three to four bedrooms or the house component I suppose rents well as well in the right market. But in some markets where vacancy rates are a bit higher, it could take you a little while longer to find the right first tenant for the property.
In terms of how to execute on a dual income property or a brand new dual income property, that’s what I wanted to explain now because before I started this business where we help 40 million …. sorry 120 people build and buy over 40 million dollars worth of property per year, I actually worked for one of the largest home builders in Australia, New Zealand, and America. In the year that I left that business we had over a billion dollars worth of building. I learned a lot about how to acquire land at the right prices, how to work with builders to make sure that they win because they’re not going to do anything for nothing, but you also win in terms of the price. I learned a lot from building a lot of product myself with my wife who’s an interior designer. What are the right types of products to take to the market, what are the things to upgrade, what are the things to leave, how to get a turn key product so everythings absolutely included and a fix price contract in place, and because I own a property management business as well, I’ve gone full circle from identifying land, building the product, managing the build, and then renting the product or getting tenants into this product.
I’ve really understood what they’re looking for and learned a lot from that perspective. That collected knowledge is what I’m going to start sharing now. In terms of identifying the state, that’s probably something else for another video. If you have a look at some of the other videos, whether you’re on YouTube now, Facebook, or on our blog, there’s some great videos that we’ve done on how to identify the right market and state at the right time. Jus check those ones out but it’s very important to know the state first then the market within the state. The market is based on which areas got the most potential for capital growth, it’s got the lowest vacancy rates, it’s got land at acceptable prices where you know that you can create this product and it can be well received by the market. Let’s for example in today’s video pretend that the state we’re targeting is Queensland. The market might be North Brisbane or Sunshine Coast for example. Two markets that I personally believe will perform extremely well in the next couple of years.
This is filmed in 2017 this video. Once you’ve got the state nailed, the market nailed, it’s then about finding the right piece of land. From my experiences, obviously it’s dependent on each local area. For example on the Sunshine Coast to do this product, the land needs to be at least 600 square metres. Where in Moreton Bay or North Brisbane it’s got nothing to do with land size but it’s got to do with size of the dwelling in relation to the land plus how wide the front of the lot is plus certain suburb characteristics. It’s really important to understand not just the local market, but the piece of land in my opinion, obviously the Sunshine Coast is a bit different and other markets are a bit different. It should be at least 400 to 500 square metres. That means you can do a decent size house with good bedrooms, good living areas, good outdoor entertaining, good backyards, good off street and car parking without having to really reduce it down to such a level where you’re playing with extremely small blocks, really narrow frontages and then you’re having to sacrifice design and quality.
The land size is very important. I think it’s also important to consider where to buy this type of product. A lot of this product is being sold in Greenfield Estates where there’s heaps of land available. I personally don’t like Greenfield Estates unless they’re in a very specific area at the right time and it’s more boutique and higher end. I like to partner with high quality developers like Stocklands for example, rather than some of the cheaper developers that just create a road with a couple of trees and some cheap grass and there’s no community feel. If you’re going Greenfield, make sure you go into a premium estate at the right time of the cycle in the market that you’re targeting. What we like to do is identify in field blocks in established suburbs where there’s not a lot of brand new product and buy a much, much cleaner, high quality piece of land in an area where this type of product isn’t always there.
It’s something different and unique that you’re bringing to the market place. A good example of this would be within ten to 15 kilometres of the city or close to the cities of Australia or as close to the beaches as possible. Generally as a buyer’s agent, we only buy within one and a half kilometres walking distance to the beach or directly within that seven to 15 kilometre radius of the CBD because they are the markets that ultimately give you historically better capital growth in Australia. Finding an in field block is a different way of doing it. You may pay a little bit more for that piece of land but you should also in the right area at the right time get a better return on that as well longer term.
There are other important features for the land. I like flat blocks. If there is a little bit of slope to the block, it’s much easier for that slope to be slightly backwards back towards the street like running downhill to where the sewer and the water connexions are. It’s also important to have no easements over that piece of land or nothing running down the middle of it because that can add significant money to the construction cost. No man holes. A well connected block that’s already got the connexions there for example makes it a lot easier. Something that’s self accessible with the local town planner or the state government plan is also very important where you don’t have to go through a development approval with the local council to get this product in place.
That’s important to understand those planning schemes as well. I know this might be overwhelming but a lot of people are making mistakes with this type of product at the moment. If you need a hand, I’d love the opportunity to continue this conversation with you. You can just jump over to my website www.pumpedonproperty.com and book a one on one strategy session with me where we can talk about this product specifically, where you can identify great opportunities right now, where the market is at, which state, which regions to begin targeting, what you should be paying for, for land, what types of returns you could potentially be expecting in today’s market 2017. The next part of the process is once you’ve got the right piece of land at the right price you’ve got to go to market and find the right builder.
Unfortunately in Australia, like the marketers, most builders are absolutely cowboys. I’ve seen the same builder charge two clients for the exact same design anywhere between 30 and 100 thousand dollars more in price because either that client didn’t negotiate properly with the builder or they didn’t know that they could negotiate with the builder or they didn’t have a relationship with the builder or they wasted the builder’s time up front and they didn’t know what they were looking for and they thrashed around a lot so the builder put a paying cost associated with that client. Or the client went through a property marketer and their marketer said, I’ll organise the builder for you and got this massive undisclosed commission on the behind the scenes that you have to pay for.
Not all builders are created equal. You need a few things when considering a builder. You need to know that the builder is reputable and has been in the game for awhile. You need to know that the builder can produce this type of product and maybe even specialises in this type of product, that their fittings, their fixtures, their inclusions, and their design is all going to be at the standard that meets the market or is slightly above market. You need to know that the builder can deliver in a reasonable amount of time. Most builders in Australia at the moment should be able to build this type of product as a single story dwelling between 14 and 20 weeks maximum. You need to find out what they’ve done recently and really get them to show you some of that product completed and under construction. You need to be able to get on with them as well and make sure that they care about you, they’re listening to you, and they understand what you’re looking for.
I know some great builders in New South Wales, some great builders in Victoria and some great builders in Queensland. If you’re looking for an introduction to a great partner but you don’t have one and you want to save yourself some time and some of the pain that myself and people that I’ve spoken to in the past have had to go through searching for the right builders and getting the right product at the right price, please let me know. I’d be happy to introduce you to someone. I look for those things in the right builder. Then once I’ve chosen the builder, firstly I thrash around with the design and make sure I get the design perfect. In this type of product, the things that I’ve learnt that are important are oversized bedrooms so at least three metre by three metre bedrooms, good living areas like oversized, open plan living areas, nice backyards with an al fresco or some sort of undercover deck that people can entertain with.
There’s the design side of things and once you’ve got the design nailed then you can focus on the colours, the fittings, the fixtures, the accessories, and making sure that, generally what I like to do is identify where the middle of the market is and be slightly nicer. What I try and create is a cheap product that looks premium. I’m talking about in average areas, where you’re talking about a turn key package under 550 thousand dollars. If you’re talking about doing this in a much nicer area, then obviously the quality of the product has to meet the market. I like to create a product that’s slightly above market averages in terms of the quality. Some of the things that I like to spec up are the façade to make it look a little bit nicer, the front of the property. I like to do a slightly nicer aggregate on the driveway. I do a slightly nicer grass and make sure I do a little bit of landscaping as opposed to just grass and timber fences. I make the ceilings a little bit higher so 25 hundred ceilings.
I do floor to ceiling tiles in the bathrooms and make the tap fittings and door handles throughout the entire house just slightly nicer. I do down lights and a slightly nicer fan, slightly nicer tile in the living areas like a 600 by 600 millimetre tile. These are just some things that I’ve learned that add value to tenants. As a owner of a property management company with hundreds of properties under management, I get really direct feedback from what the market wants. Just from building these properties, probably 50 or 60 of them over the last five years with clients and really seeing what works for different people and different market places and seeing that finish product and learning and doing it myself with the product that I’ve recently bought. I know there’s a lot of things we’ve talked about in today’s video but I really wanted to give you the opportunity to understand this whole how to build a brand new dual income property. Like I said before, if you’d like to have a one on one conversation with me to talk about this product and the options available in the market, I’m pretty confident that we can find you a great piece of land.
We can negotiate a great price with the builder in a high quality market where you’re going to get good cash flow, good consistent returns and above average capital growth long term because it’s still very important to get cash flow plus capital growth. If you’re interested in having a conversation further, jump over to www.pumpedonproperty.com and click on strategy session and we can talk about an hour. If you want to do it yourself, I’ll point you in the right direction. Information is cheap and free. If you need a builder, I can introduce you to one. If you’re looking for a piece of land, we might be able to help you. Or if you’re looking for someone to hold your hand all the way through this process, help you identify the market, educate you on your options, find the right piece of land, the right builder, help you with the right design, help you get all the colours, fittings, and fixtures sorted, project manage the entire construction process for you, make sure that everything is perfect at the completion, and then help you manage the property after and get tenants in it, then we’re a buyer’s agency who help people do this every day of the week.
We would love the opportunity to help you. I really appreciate your time today. Thank you so much and until next time stay hungry. Thank you.