How does an immediate equity gain of $183,778 sound from building a duplex? A client recently experienced this with a development project in Armidale, North Western NSW.
Now you might be wondering why we chose Armidale for this project. Well, a strategy is important of course. The clients wanted to obtain a large amount of equity and have positive cash flow from day one. We knew that Armidale has strong rental yields and offers good value for comparable villas and townhouses. Financial perimeters are also important and in this case, we needed a duplex that would fit under the $600,000 mark (including land, construction and council costs).
And then there is Armidale itself. It differs from most inland regional centres because it has a long established university, transforming it from a rural town to a sophisticated and cosmopolitan small city.
Through the University, TAFE, private and public schools the city has become a significant education centre, creating a wider range of jobs and business opportunities than are usually found in the country. It has a well-educated and diverse population who stimulate change and demand a high standard of living.There is also the $49 million development anchored by a Woolworths, Big W and 32 speciality stores.Add to that the $81 million upgrade of the hospital and we have a city going places.
Armidale is also anchored half way between Sydney and Brisbane on the New England Highway so its location is very appealing. Its airport services the Gold Coast, Brisbane and Sydney. After a thorough investigation, Armidale got the nod for this project.
Planning and Construction
We chose a great block in the very popular Sheridan Park Estate. The land was slightly sloping but not enough to add much to the cost of earthworks.
The next task was to get the Development Application (DA) approved. After a few minor hiccups, such as revising the floor plan to satisfy the council’s town planner, the go-ahead was given to build. Fortunately, Armidale council are very ‘duplex friendly’ as they are in a growth phase at the moment and welcome development. The builder then had to obtain the Construction Certificate (CC) before commencing, but this time was used to order the materials.
Nine months in total and project duplex was completed. We were able to strata title the units onto different titles so that we could see how much of that ‘magical’ equity we might have.
With strong tenant demand for quality properties in Armidale, both of the duplex units were rented almost immediately. The combined weekly rent is $760, producing a gross rental yield (760×52/586,222×100) of 6.7%. The owners have enough equity from this project to purchase further properties and fund development projects.