Strategic Duplex Development: A Deep Dive into Property Investment Success

The world of property investment is both thrilling and complex. Every investor has distinct goals and circumstances, so crafting a bespoke strategy aligned to an individual is crucial. Let’s delve into a compelling case study that exemplifies the power of strategic planning, expert advice and a clear understanding of one’s investment objectives.

The Investor’s Journey and Strategic Choices

In May 2016, one of our clients embarked on a well-thought-out investment venture by purchasing a block of land for duplex development. The objective was to build two 3-bedroom, 2-bathroom, 1-car properties on the same parcel, leveraging cost efficiencies in constructing multiple units simultaneously. This strategy curbed construction costs and set the stage for significant short-term financial gains.

Timeline of Investment and Key Figures:

• May 2016: Land acquisition through an off-plan purchase, securing a fixed-price building contract.
• 2017: Registration and settlement of the land, with the construction phase beginning later that year.
• October 2018: Completing construction and finalising subdivision, resulting in two distinct titles for the duplex units.
• October 2018: Sale of both properties, with Unit 1 fetching $480,000 and Unit 2 selling for $505,000.

Financial Breakdown:

• Total Cost for Land, Construction & Subdivision: $766,000Land Purchase: $329,000Construction Costs: $437,000
• Total Sale Price in October 2018: $985,000
• Gross Development Profit: $219,000 (before expenses and interest)

Strategic Sale and Realised Profit

Upon completion in October 2018, the investor opted to sell both units, achieving a gross profit of $219,000 before expenses and interest. This decision aligned perfectly with their strategy to secure immediate development profit rather than retaining the properties for long-term investment. The proceeds were then channelled into their Self-Managed Super Fund (SMSF), illustrating a successful and well-executed development project.

Current Market Valuation and Alternative Strategies

An alternative strategy could have been to hold the two property assets to allow time in the market.? Assessing today’s financial picture would be notably different with further capital growth and rental returns:

• Sale Prices in 2018: Unit 1 at $480,000 and Unit 2 at $505,000.
• Estimated Value of Unit 1 in 2024: $780,000
• Estimated Value of Unit 2 in 2024: $855,000

Holding the properties would result in a combined estimated value of $1,635,000 in July 2024. This marks an estimated capital growth of $869,000 from the original cost of $766,000, equating to an impressive 113.4% growth. Furthermore, the current rental income for both units would be approximately $1,236 per week.

Key Insights and Learnings

This case study underscores the critical importance of aligning property investment strategies with personal goals and situational factors:

• Immediate Profit vs. Long-Term Appreciation: The investor’s choice to sell the properties immediately provided quick liquidity and profit, which were reinvested per their strategy.
• Alternative Holding Strategy: Retaining the properties could have resulted in significant capital appreciation and rental income, showcasing a different but equally valid investment path aligned with different financial objectives.

Conclusion: The Necessity of Customised Investment Planning

Property investment is not a one-size-fits-all endeavour. This case study demonstrates the efficacy of a development-focused strategy prioritising immediate profit and reinvestment. It also highlights how different approaches can yield varied results, emphasising the need for personalised investment planning and expert guidance.

Effective property investment requires meticulous planning, comprehensive modelling, and a profound understanding of all facets of your investment goals. Partnering with professional property investment advisors ensures your strategy is bespoke to your needs, maximising returns and minimising risks.

For more information, visit?www.aspirenetwork.com.au?or call our office at 1300 710 933 to connect with an accredited and independent Property Investment Advisor. Always review any property investment strategy, location research and investment analysis data with a professional QPIA (Qualified Property Investment Advisor –?www.pipa.asn.au) and Accredited ASPIRE Property Advisor Network Advisor advisor. Property investing is about purchasing a property that aligns with your goals and investment strategy. You should never be sold an investment. Know your numbers! If you invest wisely and strategically, the Australian residential property market can be a rewarding venture