Are Dual Key Apartments A Good Investment?

What Are Dual Key Apartments?

First off, what are dual key apartments?

A dual-key apartment is two self contained separate adjoining units but both are held under one legal title. Often the combined floor area of the two units will be the same as a standard 2 bedroom apartment (75 square metres or sometimes even less) so for two separate self contained apartments they are very tiny. The two apartments are completely separate or sometimes will share an entranceway with separate locked doors going in to each individual apartment, but legally they are the same property. Typically these are built in city fringe areas, close to public transport and other amenities.

What Are The Main Advantages Of A Dual Key Apartment?

So what are the main advantages?

Dual key apartments are becoming increasingly popular, especially in major cities where real estate prices are high. For an investor these properties can maximise yield and for an owner occupier (less common) this type of investment allows you to live in one unit while renting out the other, which can help to cover your mortgage payments and generate income.

For an investor these properties offer the potential for a better yield; the two units can be rented separately to different tenants under separate tenancy agreements. By having two separate self contained apartments within the one title, investors can rent out both units separately. Two separate, self contained units will often enjoy a higher rental return than a single unit of the equivalent floor area. In addition you are spreading your ‘vacancy’ risk between two tenancies.

Another key advantage for investors is that most dual key apartments have been recently built and fit the IRD’s interest deductability rules.

What Are The Main Disadvantages Of A Dual Key Apartment?

What are the disadvantages of a dual key apartment as an investment?

There are several disadvantages of dual key apartments that should be considered before making a purchase. Dual key apartments are often small, making them less comfortable to live in than other types of apartments. They also tend to be more expensive than regular apartments on a cost per square metre basis. Landlords will need to find a suitable tenant. Not everyone will want to live in such a small living space but as the tiny house movement develops and the awareness that we need to minimise our footprint on the planet grows there is a small but growing community of people who enjoy smaller living.

Dual key apartments are less likely to appreciate as quickly as a standard house or even a standard apartment so not the best option if you are looking for capital appreciation. When the time comes to sell these may also be harder to sell. They are still a niche market.

In conclusion, dual key apartments can offer investors the potential for higher rental yields and the option for owner-occupiers to generate additional income. However, it's important to consider the drawbacks such as the smaller living space, higher cost per square metre, and potentially slower appreciation compared to standard properties. It's essential to weigh both the advantages and disadvantages before making a purchase to determine if a dual key apartment is the right investment for you.