Posted on August 5, 2021
Dual Occupancy and Vacancy Rates
Our future clients always ask whether a dual occupancy house rents well. The simple answer is yes… and very well. Like any property investment, it’s important to ensure that the fundamentals of demand and supply are in your favour.
A rule of thumb that is used in the industry is a vacancy rate above 3% is a tenants’ market and under 3% an investors market.
Don’t be fooled by high rental vacancies however. Often a high rental vacancy can be an indication of a changing and dynamic market.
Let me explain. Some suburbs in cities are ideally located near train lines and other infrastructure. i.e. they are well established with quality schools and shops and transport routes.
Often well-established areas are sort after for these reasons with many young families coming in and buying older properties, demolishing and building anew.
With higher living standards and higher expectations, many renters prefer a newer, modern interior with modern kitchens and bathrooms. They may end up moving out of old properties and move either into new houses in new estates or new properties in the well-established areas.
This trend can often leave many older dwellings sitting vacant for long periods of time while they seek a tenant. Many of these older properties will eventually be sold, bulldozed and replaced with new dwellings.
In this case this trend may push vacancy rates up high but is not a true indication of what the market is doing. So it pays to speak to someone with local knowledge.
Another situation may occur in new estate where there are a lot of homes being built concurrently. These will never all rent out at the same time and there may be some delays before they are. Over time, new estates settle down and head to normality.
So, there may be a false indication of high rental vacancies but this is only temporary. Remember, your property investment is for the long haul.
Why Dual Occupancy House Rentals Are Good
When we look at packaging up a dual occupancy house investment for investor clients, we always try and make sure that there aren’t too many other investment properties in the area.
We also seek out infill land sites and boutique subdivisions in well-established areas where possible. This ensures that we can achieve a high rental yield.
Our experience has shown that the auxiliary side of the dual occupancy house investments are renting exceptionally well, not taking long to find tenants, and achieving high rental yields. The auxiliary side of the dual occupancy house is the smaller side, generally a one or two bedroom.
One of the key reasons for this is that in the areas where we package a dual occupancy house, there aren’t that many one and two bedroom properties to rent. In places like the CBD there are hundreds of one and two bedroom apartments available.
However, in the key growth locations within the 30km of the CBD where we tend to focus, there aren’t large numbers of apartment or townhouse developments. This means that the one and two bedroom options are very popular for singles and couples and means that they don’t have to share a larger house with other tenants they may not know well.
Dual occupancy houses rent well, but you need a good property manager.
I cannot stress enough that it’s very important to have a good property manager. A good property manager can ensure that you achieve a better yield for your dual occupancy house, and that the regular checks and maintenance are taken care of.
Don’t forget to download our FREE Report on dual occupancy homes.