Duplex or Triplex Development!
Damon Stroud
Should I Build a Duplex or Triplex Development!
A very common question we receive, is should I build a duplex or a triplex on my development site. One would instinctively think if you can build 3 homes on one block isn't that always going to be the best yield and return on your investment! As you will see, there are a number of important factors that will affect your final decision to maximise profits!
Before we answer the question in full, we need to look at the zoning of your block to confirm the size of the building lots. The majority of duplex and triplex development sites in the Perth metro area are zoned R30 so let's use this as a good base example to explain things.
Exert taken from the West Australian State planning Policy 3.1
Let's say you own a building site that is 900 square metres and zoned R30. As per the table 1 (from the residential R codes) states a minimum of 260m2 with an average of 300m2. In layman's terms this means 300m2 needs to be able to divide into 900 three times to be a triplex development. There are concessions and special allowances from some councils but for the example we will work with the standards. There may also be anomalies in designing up three 300m2, blocks so the are R-codes allow the blocks to go down to a minimum of 260 square metres (providing you keep the average). The front block will require more space as it has a primary street setback to suite council streets-scape rules. The middle and rear lot only need secondary and side setbacks of around 1.5 meters plus a reversing bay capability. A 300 square metre block with a site coverage of 55% will allow the largest footprint to be 165 square metres. The footprint must include the garage, the house and front porches or verandahs. By the time we take a garage out of the allowance, we are left with approximately 130 square metres of internal living area!
Working Out maximim (internal) house size on a 300m2 block
Now we know how big the inside of the home is going to be, we can work out how many rooms can be drawn into the design. 130 square metres of internal living area will allow for a three bedroom two bathroom home plus a medium sized theatre (if well designed). The bedroom sizes will be around 9 to 11 square metres.
Triplex Pricing
The pricing to Build one of these homes fully finished and ready to move into, will be around $200,000 to $220,000 depending on the final finish and specification. That means in total, a triplex development based on the above sizes could cost as much as $660,000.
The Pros and Cons of a Triplex Development
Although you are out laying more money up front and building more homes, there are still benefits over building a duplex development. A triplex development offers a lower price point for new home buyers to enter or a lower price point for the general market. From our experience lower price points tend to get bought quicker by first home buyers and investors.
The negatives of a triplex is a larger initial outlay of funds and potentially longer holding costs. It is effectively more risk. You have more homes to sell plus the buyer's may not want additional neighbours. A triplex will always require that two homes will end up using the common driveway which may turn buyers off versus a duplex where the rear home could have its own dedicated driveway.
The advantages the Triplex Development
Lower resale price point means easier to sell
More units to sell - could mean more/less profit*
Works well in areas for semi retirees or first home buyers
Disadvantages of a Triplex development
Homes may be too small for the market place-especially in affluent areas!
Higher construction out-lay
More homes/units to sell - means longer time to realise settlement and profits / holding costs
Two homes (maybe all 3) will use the main driveway (can impact resale)
Lower rental returns
The 3x2 market place is competitive
Pros and Cons of a Duplex Development!
Now that you understand the basic fundamentals of a triplex development let's have a look at the advantages and negatives of a duplex development.
Working with the same size block of 900 square meters, a duplex development would offer two blocks of approximately 450 square metres each. With a council allowance of 55% site coverage, this means we can have up to 247.5 square metres of housing footprint! After we take out the garage, store area, veranda or porch to the front we are left with approximately 206 square metres. 206 square metres is a huge area for the inside of a home to sit on. As an example we could build a 4 bedroom two bathroom home with a theatre with an activity and a games room. You could even have a triple garage if you wished. The cost to construct a single storey duplex design (one) would be around $270,000*.
This price would include-
Subdivision/Site costs
Construction costs
Turnkey/finishing costs
At this price a duplex development would cost around $540,000 (two homes) but offer greater Family Living. You could also propose two street frontages offering two narrow block designs. Narrow lots avoid the long driveways and offer better street appeal. From our experience, if you put these duplex designs on the market they would be specific to a large or growing family with needs. What we have seen, is a family with specific needs such as games room, additional storage in the garage and activity room, will happy to pay a premium for a family friendly home (especially when it is new).
Duplex Design internal Building area on a 450m2 block
A duplex development of this type also allows you and your family to live comfortably within one of the units. This has advantages as if the home is claimed as your principal place of residence it is not subject to capital gains tax (speak to your accountant*). The negatives are that you are asking for more money in comparison to a single triplex unit.
Advantages of a Duplex Development
Cheaper construction costs
Less Homes to build
Less homes to sell
Greater rental returns
Could be a family home for yourself enjoying tax relief
Disadvantages of a Duplex development
Higher resale price
Less units to sell
What is the most profitable development!
Now you understand how many units you could build on your block and what the sizes and style of the designs would be, we can now look at what would be the most profitable development.
When it comes to pure resale and valuation appraisal, it comes down to three major factors. The first is the most obvious being location. The second is the size of the land. And the Third is the quality of home and design of the home. One of the first questions a prospective buyer will ask is “Who Built it!”
Key Criteria for valuation of Property
Location
Block Size
Design/Build quality of Home
Triplex Profits
If we were to sell a 3 bed 2 bathroom home with a theatre of approximately 130 square metres of internal living area, we are competing in a fierce market place. The approximate selling price in the Perth metro area we would estimate somewhere between $390,000 to $440,000 in a good market. Approximate profit is typically around $30,000 per unit or $90,000 for the development.
Duplex Profits
Because a duplex development offers more land and larger rooms plus more rooms, it is safe to say that the resale price would be far higher! A duplex designs that offers 4 bedrooms, double garage, activity, theatre, (around 200 square metres internally) we would estimate a resale price of $560,000 to $600,000 on average. Approximate profit would be $60,000 totaling $120,000 if both homes were sold at the same time.
Construction cost outlay versus Profits*
Conclusion
Although profits and expenses will vary from development to development the above numbers are based on what we have seen from our own clients in the past.
Triplex development construction cost $660,000 with a $90,000 profit*.
Duplex development construction cost of $540,000 with a profit of $120,000.
Please note from our experience whether you do a duplex development or a triplex development the profit will vary from suburb to suburb. More affluent areas will pay a premium for large family style homes. Whereas lower socio economic areas will not pay a premium and are dependent on low price point to enter the marketplace. The key here is to understand that there are options available before you make your final decisions.