You might have heard of the keywords such as Dual Living, Dual Occupancy, Dual key, Dual Income etc. These are common terms used in the property investing world and now recently becoming a common choice for families living with parents and young adults. Families have also started using the other dwelling as office or rental property.

So, what is this new type of property? Why is it getting popular? Is it a good investment?

We have compiled a comprehensive guide that covers
- the basics
- insights for Investors
- FAQS.

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Table of Content

Part 1 - The basics of Dual Occupancy Homes

• What are Dual Key Homes?
• Who buys Dual Key (The Market)?
• Pros and Cons of Dual Occupancy Home.

Part 2.- Dual Key Home Design Examples

Part 3 - Investing in Dual Occupancy Homes

• Dual key offers 5 income streams
• 200K income with just 1 property

Part 4 - Why buy or invest in Dual Occupancy Homes (backed by research)?

• The missing middle! We mostly build one type of property
• Are we building the right stuff?
• Population projections demand dual occupancy homes
• Tenants share their homes anyway to save and make money- Flatmates and Facebook marketplace examples

Part 5 - How to identify investment hotspots for dual occupancy homes

Part 6 - FAQS

Part 7 - The Opportunities

• About Heaps Good Homes
• Dual Occupancy Opportunities
• Thanks Heaps!

Let's jump in !!

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Part 1 - The basics of Dual Occupancy Homes

What are Dual Occupancy Homes ?

In simple terms, a “dual occupancy home” is a type of property where two separate dwellings are constructed on a single lot of land. This allows the occupants to live in each area or rent each area separately.

(The concept can also be described as a… dual living home, dual occupancy, dual key home, dual family home, dual income property, granny flat home, secondary unit home, ancillary unit home, multi-generational home and/or a multi-family home). Please note, a duplex is the common term for a dwelling whereby 2 dwellings can be strata titled.

For your reference, here’s a sample dual key home (see below) to give you an introduction to the cashflow strategy that allows you to build wealth faster.

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Who buys Dual Occupancy Homes (The Market)?

The market for Dual Occupancy/Dual Living Homes is quite large and is increasing every year due to increased awareness and acceptance. Below are options and usecases of dual occupancy homes.

Owner Options

Principal Place of Residence + Parents
Principal Place of Residence + Young Adults
Principal Place of Residence + Rental Property
Principal Place of Residence + Holiday Unit… for family & friends
Principal Place of Residence + Home
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OfficeJoint Purchaser - JV

Principal Place of Residence + Principal Place of Residence
Principal Place of Residence + Rental Property
Rental Property + Rental Property
Rental Property + Home Office / Holiday Unit for family & friends
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Investor Options

Rental Property + Rental Property
Rental Property + Parents
Rental Property + Young Adults
Rental Property + Airbnb / Short Term Accommodation
Rental Property + Holiday Unit… for family & friends
Rental Property + Holiday Home
Rental Property + Home Office
Rental Property + Future Principal Place of Residence

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What are Pros and Cons of Dual Occupancy Homes?

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What are the Pros?

2 dwellings + 2 keys = 2 incomes
2 income producing properties on one title

Higher Rental Returns
2 separate dwellings allow each dwelling to be rented for full market rent… (this is normally 50% more than a traditional house)

Capital Growth
Dual occupancies are still rare and provide great capital growth, some times even more than regular family home.

Lower Costs
No body corporate or strata fees are payable to a body corporate manager
Only one set of council rates are applicable

Save $10,000 in stamp duty
When you buy a block of land then build… you only pay stamp duty on the land… so this will save you an estimated $10,000 immediately.

Larger Rental Market
Target markets - Smaller households… which makes up the majority of the rental market
Ageing population (downsizing to a smaller dwelling)
Many families require a living space for a parent or elderly relative
Home Office
Holiday Unit

Flexibility
Dual occupancy homes can provide homeowners with flexibility to accommodate different living arrangements, such as aging parents, adult children, or tenants.

Space
The separate dwellings in a dual occupancy home can provide more space for families or individuals compared to a traditional single-dwelling home.

No council infrastructure charges apply (unless stated in your build contract)

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What are the Cons?

Higher cost to build?
Although dual key homes have existed since the beginning of time (ie. homes with grannyflats), it is a relatively new property type that is being promoted by councils and various builders. Since demand is very high, some builders have been charging a premium price to onstruct. In reality, the cost is slightly more than a traditional home since a dual key home does have more bathrooms, laundries and kitchens. Most notable, a proper firewall is essential to provide a safe living environment and to comply with current building regulations.

Zoning restrictions
Zoning regulations vary from one location to another, and in some areas, dual occupancy homes may not be allowed.

Maintenance and upkeep
Maintaining two separate dwellings can be more challenging and costly than maintaining a single-dwelling home.

Privacy concerns
Depending on the design of the dual occupancy home, privacy concerns can arise for both the homeowner and the tenants or residents of the separate dwellings.

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Conclusion

In summary, the advantages of a dual key home, far out weight the disadvantages. A flexible modern dual key design will have broad market appeal as a principal place of residence, and/or shared multi-family dwelling to keep families closer, and/or to create multiple income streams as a cashflow positive real estate investment.

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Part 2 - Dual Occupancy Home Design examples

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Example Design 1 (4 + 2 bed, 2+ 1 Bath, 1 + 1 Garage)

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Example Design 2 (4 + 2 bed, 2+ 1 Bath, 2 Garage 1 Carport)

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Example Design 3 (Duplex like Dual living)

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Example Design 4 (Family Friendly Dual Living)

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Part 3 - Investing in Dual Occupancy Homes

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Dual key offers 5 income streams

A dual occupancy home  generates “multiple income streams”.

Here’s a few examples of the different income streams that are automatically created once you buy a dual occupancy property.

Income 1: Rental income generated from dwelling #1 of your dual key investment

Income 2: Rental income generated from dwelling #2 of your dual key investment

Income 3: Mortgage loan reduction

Income 4: Depreciation and tax savings

Income 5: Capital growth.

The end result… is a cashflow positive real estate investment property that essentially pays for itself over time and automatically creates the above five income streams.

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125K yearly income with just 1 property!

Let's take an example for this Dual occupancy property in Sunshine coast. This is an actual deal available at the time of writing this article.

‍Property Price in 2023
$779,000
Yearly Income from Rent in 2023
$60,320 (7.73%)
Yearly Income from Depreciation in 2023
‍$16,000
Yearly Income from Capital Growth in 2023
‍$47,000
Yearly Benefits from Mortgage Reduction in 2023
‍$2,000
Total Yearly Income Realisation in 2023
‍$125,320

Now let's look at this property in 20 years, assuming 6% capital growth and 5% rental growth per year. It's Sunshine coast guys, could be a lot better in 20 years.

Property Price in 2043
$1,719,000
Yearly Income from Rent in 2043
$160,047
Yearly Income from Depreciation in 2043
$10,000
Yearly Income from Capital Growth in 2043
$103,000
Yearly Income from Mortgage Reduction in 2043
‍$7,200
Total Yearly Income Realisation in 2043
$280,200
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Please note, the above stats do not account for cumulative income and equity you have made in the last 20 years that has helped you acquire more such properties.

Imagine having 5 properties without mortgage in 20 years. Happy Retirement! Happy Passive Income! Happy Freedom!

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Part 4 - Why buy or invest in Dual Occupancy Homes (backed by research)?

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The Missing Middle (Article by Domain Research House)

How to address Australia's medium-density housing shortage

Medium-density housing is undersupplied in the suburbs of Australia’s capital cities. A building boom has helped erode this shortage somewhat, but demand for this type of housing is rising and will continue to grow.

To meet the demand for more medium-density housing, state and local governments need to change planning rules that constrain the building of medium-density housing in Australia’s capital cities, particularly in areas close to public transport.

But governments also need to consult communities about any changes and also communicate the benefits of more diverse housing types. They also need to invest in infrastructure, such as parks, schools and public transport, to meet extra demands from a growing population.

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What is “medium-density” housing?

Typically, medium-density dwelling types include townhouses, terrace houses, semi-detached houses, duplexes and manor houses are (this is the definition used in this article, which is in line with the ABS definition) (see diagram below).

Some definitions also include villa units and small “walk-up apartment blocks” as medium-density housing.

Medium-density housing is also referred to as the “missing middle”, as this type of housing is considered to be “missing” from cities. The missing middle is an apt description of Australian cities, which are dominated by detached houses.

According to the 2016 Census, 12.8 per cent of the Australian housing stock (1.27 million dwellings) was medium-density (see table below). The share of medium-density housing is highest in capital cities and the ACT, and lowest in Tasmania. Melbourne contained the most medium-density homes in 2016, at just under 310,000.

There is strong demand for medium-density housing, but there’s a shortage in our capital cities

There is substantial unmet demand for medium-density housing within Australia’s major capital cities. The Grattan Institute conducted a survey in 2011 that asked people to consider the trade-off between price, size and location when deciding on what home they would like to live in, while also taking into account their income.

This research found that when the actual housing stock in 2016 was compared to people’s preferred housing stock (once people had considered the trade-offs), there was an undersupply of medium-density housing (and apartments) in Sydney and Melbourne, particularly in middle and outer suburbs (see table).

In Sydney, medium-density housing made up 14 per cent of housing in 2016, but the preference was for 25 per cent of the housing stock to be medium density (a shortage, or undersupply, of 11 percentage points). In Melbourne, the shortage was nine percentage points (a preference of 26 per cent medium-density compared to the actual 17 per cent).

A replication of this study for Perth found a similar shortage across most Perth regions (see table).

The above research, which uses a survey conducted in 2011 and compares this to the dwelling stock in 2016, likely understates the current shortage of medium-density housing.

On the supply side, the share of Australia’s housing stock that is medium-density hasn’t increased by much. This is because the proportion of new medium-density housing built in recent years has only been slightly above the existing dwelling stock. In Australia, 16 per cent of all building approvals over the past three years were for medium-density housing, which is only slightly higher than the existing proportion of Australia’s housing that is medium density (12.8 per cent; see table).

It will take several years of a higher share of new medium-density dwelling construction to make a significant inroad into the shortage identified in the above studies.

Demand for medium-density housing is likely to have grown in the eight years since the Grattan Institute survey was conducted. As congestion has worsened and commuting times have increased, particularly in Sydney and Melbourne, it’s likely that people would place a higher premium on location than they did in 2011. Jobs have concentrated in and around city centres, making proximity to the city and public transport more valuable. Housing preferences have also shifted, with walkability, a key attraction of medium-density living, highly valued.

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Governments should encourage the construction of more medium-density housing

Demand for medium-density housing is likely to keep growing, underpinned by high land prices, strong population growth, longer commutes and changing housing preferences.

State and local governments need to adjust planning rules to enable the construction of more medium-density housing so that the housing stock shifts closer to what residents of our cities say they want.

But first, governments need to undertake community consultation to hear resident concerns and deliver better public infrastructure such as parks and public transport (and use existing infrastructure more efficiently). Governments also need to communicate the benefits of medium-density housing, such as walkability, better local shopping and entertainment, improved housing affordability, and diversity of housing choice.

The federal government can also play a role by providing infrastructure funding and other incentives to state and local governments that allow more medium-density housing to be built.

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“ARE WE BUILDING THE RIGHT STUFF?”

Analysis by Michael Matusik

Free Matusik Missive – I believe that demographics, eventually, shape everything.

And whilst there is a demand for more compact housing, the want to live on top of each other (and the ability to afford the premium to do so) is at odds with Australia’s future demographic shape – and more importantly, what our key buying groups want & can afford.

The same thinking also applies to new McMansions in outer suburbia.

Let’s start from the top

As we outlined several months ago, we don’t use the more traditional generational demographic markers, such as Baby Boomers, when assessing underlying housing need or demand; we think they are too broad.

Instead, we break the housing demographic market into six distinct buyer segments:

• Young renters
• First home buyers
• Upgraders
• Downsizers
• Retirees
• Aged care

Children, when it comes to housing need, are captured in older segments.

The first chart below shows the relative size (by no. of residents) within each key demographic segment within Australia today. But it is the change in household formation that best determines future housing need, as shown by our second chart below.

Our second chart suggests that over the next ten years there will be a need to build more homes for first home buyers; people downsizing & retirees.

Annual housing need for young renters is projected to decline (and so, I have to ask who is actually going to rent out all those little inner city boxes?), as too is the demand for upgrader housing.

So the need for those new, big suburban homes should also wane.Housing required for aged care – for now – is likely to remain steady.Working out how many new homes are needed (and what and where these new homes should be), is more than just dividing the annual projected total population growth by the average number of residents per dwelling.

What we like to do is work out what is happening in each of the six distinct buying segments.

This provides us with a guide as to the real underlying need for new homes(remember, it is about household formation & not just population growth), and a better understanding as to what homes are actually wanted.

Let me demonstrate this by using first home buyers & those looking to downsize, as examples.

A bit more about first home buyers

Fast facts:

• 35 to 44 years
• 3.3 people per household
• 36% no children at home
• 30% couples or living alone (lucky buggers!)
• A projected 20% of total new housing demand over next decade

Brief description: HECS; partnering later; parents as friends; travel; options galore – so it is not until their mid-30s to-early 40s that many buy their 1st home.Important housing considerations: room to grow; affordability & property improvement

Preferred housing options: some apartments (inner city); some townhouses/duplexes &small houses (middle suburbs); larger detached & dual-income homes (outer suburbs)

What most buy: a property that can be improved & is capable of taking in a tenant/s to help pay the mortgage

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And what about downsizers?

Fast facts:

• 60 to 74 years
• 2.1 people per household
• 92% no children at home
• 71% couples or living alone
• A projected 32% of total new housing demand over next decade

Brief description: As their title suggests, many want to move into something smaller & if possible in their existing neighbourhood.

Important housing considerations: low maintenance; convenience; like-minded residents; existing location; small projects

Preferred housing options: spacious apartments (inner city); townhouses/villas & dual income homes (middle-outer suburbs)

What most buy: well-priced, usually in smaller complexes; private; secure & with space for visitors & grandchildren

Of course, some first home buyers might buy a small downtown apartment or many might choose to continue renting; just as those looking to downsize might just decide to stay put &age in their existing home.

Some from either group might buy a large home in outer suburbia, too.

But if the right housing is provided & importantly at the right prices, then many in these two sample markets – along with those in our other four key buyer groups – would buy. Sofactoring in considerations such as housing affordability is also important.

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Housing that’s really wanted

Our second graphic below outlines what we think is needed when it comes to new housing across Australia over the next ten years.

Our modelling varies, according to location & local economics. For example, in a middle ring suburb, many would opt for a two-bedroom property rather than one with a single bedroom.

Many would prefer, in this situation, a three-bedroom dwelling, assuming they could afford it.

A household’s housing preference will usually change by location; with more opting for one bedroom stock closer to the CBD & more wanting three+ bedroom properties in the more outer suburbs.

So the proportional range for each housing type shown in the graphic above, caters for location spread ranging from inner city suburbs to our regional centres.

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End note

We need to provide much more diversity when it comes to our new housing stock acrossAustralia. Some places are getting this right, whilst too many are not.

There needs to be much more choice in the housing mix than essentially tall things downtown& big boxes in the outer suburbs.Town planning dogma is forcing too much new supply in the wrong places & for the wrong reasons.

Governments at all levels are not interested in improving Australia’s housing choice.

All housing – not just new stock – is too expensive as a result.

We are not building the right stuff.Many more Australians would move into more suitable digs if it was available to them.

Not everyone wants to (or can afford to) either live in a three+ bedroom detached house or an expensive shoebox in the sky.

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Population projections demand dual occupancy homes

Australia's population is expected to increase by more than 30% from 2016 to 2041.

Whopping 4,109,000 new households will need new dwellings in the next 2 decades.

Imagine 3,636,000 couples with no children + 1,536,000 single parent households + 3,523,000 lone person households = 8,695,000 small households

That's 65% of the total market needing SMALL HOUSEHOLDS

Market demands Smaller Dwellings and Dual Occupancy Homes is the solution to the burning problem of population growth and household needs.

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Tenants share their homes anyway to save and make money- Flatmates and Facebook marketplace examples

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The Flatmates Angle

Flatmates gets millions of views of every year and thousands of listings existing for Rooms for rent, Granny flat for rent, Studio for rent, share house for rent, student accomodation etc.

Guess the most popular search terms on Flatmates in the year 2023! It's undoubetly studios and granny flats! People want smaller dwelling and privacy at the same time. And that's what dual occupancy homes offer.

The rent for such shared yet private accomodation is very good and brings great yield to investors. Capital Growth combined with lucrative rental yield will set you up for success.

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Facebook marketplace angle

Facebook has thousands of listing on shared house. studios and granny flat rental, and most disappear in a week due to unreal demand for such affordable living.

Demand > Supply! And that's the reason why we call it as "The Missing Middle". There is huge under supply of such creative home with dual occupancy floor plans.

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Part 5 - How to identify investment hotspots for dual occupancy homes

Supply, Demand & Affordability are the 3 things that move the market. If Demand is greater than Supply and if the people have the capacity to buy, the property prices will go up. It works the same way for rental property, if demand of rental properties are more than supply and if people can still afford to pay the rent, the rent prices will go up.

When things are no more affordable, the market moves to the next best suburb and the property boom and doom moves like a wave.

So how to identify the hotspots?

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Step 1. Identity the Growth Area, Region or Market

These are the big picture macro drivers for a market

• Population Base: that is sound and showing signs of growth. Do people want to live here?
• Infrastructure Spend: both with private and public sector money. Is the area being supported by government and backed by investors to expand?
• Employment or Jobs: is there money in the area and will more money be coming into it to drive prices higher?

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Step 2. Identify the unicorn Suburb or Local Area

This is how to zoom in on the best performing sub-markets within the macro market.

• Vacancy Rate Analysis – is the area over supplied?
• Yield Variation – can we create cash flow positive properties?
• Median Price – can we get in below this level and get a lift from this?
• Demographics – who is living here and what housing do they want?
• Household Incomes – can local incomes support the prices?
• Days on Market – how desirable is the market right now?
• Rental Appraisals – what is our expected cash flow?
• Market Appraisals – what is our expected end valuation?
• Comparable Sales – what’s happening right now?
• Mortgage Valuations – what will the banks lend against?
• Infrastructure – is the area desirable? Are there...
- Schools
- Transport options
- Medical facilities
- Shopping options
- Outdoor lifestyle opportunities
• Best Suited Type of Real Estate – Does the market want low, medium or high density?

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Step 3. Review all Property Options in Area

This is how to identify the best kind of property to build for a certain market.

Analyse the available options from developers, agents, builders and vendors

• Compare offerings against each other to see who is most suitable to deal with or do business with? (i.e. publicly listed, full time developer, mum & dad etc.)
• Review what is physically on offer? (i.e. available for purchase now or in future)
• What is the vision of future development? (i.e. schools, shops, bus stops, parks etc.)
• Owner occupier levels vs investor participation to avoid rental ghettos
• Brand Name Developers, are the big money players here?
• Community Appeal, is this an attractive place to live?
• Quality of Development (ie street appeal, underground power lines)
• Ripple Effect, what is driving people into this area?
• Price, are there realistic expectations in the market?
• Check the flood zones
• Identify if dual occupancy would work in the area

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We at Heaps Good Homes are passionate about crunching numbers and identifying unicorn deals for our clients, staff and company founders.

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You will be pleased to see the research we put through behind every deal.

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Part 6 - FAQS about Dual Occupancy Homes

What is typical rental return from a dual occupancy home?

As a guide an investor would achieve anyway from a 6.5% to 8% gross rental yield for a typical dual occupancy home. So a typical $700,000 dual key home would obtain say a 7.5% gross rental return or circa $1150pw in rent – sometimes even more, which is 7% plus).

Why do dual occupancy homes provide the highest rental return?

In simple terms, dual occupancy homes really do provide cashflow for life. With multiple income streams, lower setup/running costs and with unlimited options... dual key homes provide the perfect combination of capital growth and maximum cashflow.

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What is the difference between dual key homes and a duplex?

Duplex is essentially a building whereby it is divided into two separate dwellings that can be strata titled and each dwelling “sold separately”. Additional counci infrastructure charges and approvals are also required (normally an additional $25-35,000 of costs are associated with a duplex project).

Dual occupancy homes CANNOT be strata titled ... (unless the relevant planning scheme in the council area changes in the future, then in theory it is possible).

How do dual occupancy homes obtain the required building approval? (And is a rezoning or development approval required?)

All dual key homes are built according to the building regulations and therefore obtain council approval and building approval during the construction approval process. (Dual occupancy homes do not require a rezoning and no special development application to council is required).

Can you help me find a block of land?

Yes, we can help you find the best available block of land... to suit your requirements.Once you set your budget, we can help find the best deal in the market place.

Obviously, the best blocks go quickly and the best deals are done off market... so be prepared and discuss your buying criteria... with us

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Can I live in one dwelling and rent out the other in a dual occupancy home?

Yes, it is possible to live in one dwelling and rent out the other in a dual occupancy home. This can provide additional rental income and help offset the cost of the mortgage.

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Can I easily finance a dual occupancy home?

Yes, it is possible to finance a dual occupancy home at 90% LVR. It is important to consult with a financial advisor to determine the best financing option for your situation.

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Part 7 - The Opportunities

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About Heaps Good Homes

We are an all-in-one platform seamlessly matching people who are looking to build a new home with unicorn deals and land estates.

Our mission at Heaps Good Homes is to make the process of buying land & building a new home simple, fair and stress free.

Our network of 500+ Builders, 7000+ Packages, and 1,000+ Land Estates empower you with choice.Our work ethic, expertise and end-to-end service make your every new property journey smooth and rewarding.

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Dual Occupancy Opportunities

We have some exciting Dual Occupancy Homes & Dual Key packages for sale by most trusted builders in Australia's newest masterplanned estates.

Feel free to browse those, and if you don't find anything interesting, we can find your a perfect block and match you to a perfect plan. Feel free to reach out to us at info@heapsgoodhomes.com.au

Browse Dual Occupancy Homes for Sale>

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Thanks Heaps!

Thank you so such for reading this far. We are confident that we will be able to smash your property investment goals by matching you to high yield + high properties that will set you up for life.

You can reach out to us at info@heapsgoodhomes.com.au for anything and everything.