2) Dual-keys are a niche product. There aren’t as many buyers out there looking for a dual-key.

Typically, these properties are bought by investors for rental yield. So, the increase in value primarily depends on how fast the rental income grows and the return other investments could provide the investor.

This limits how fast the value of these properties will increase compared with other properties, which owner-occupiers will bid up the price for.

However, that doesn’t mean these properties aren’t bought by owner-occupiers, or that you could only resell the property to an investor.

For instance, some people purchase these properties, live in one apartment and rent the other. This provides a home and income. They then use the rental income to help pay the mortgage.

Others use these types of properties for their multi-generational family. A teenager or parent lives in the studio while another family member of members live in the other dwelling.

In one case an elderly lady bought a dual-key apartment so she could live in the larger unit while her full-time carer lived in the other.

As multi-generational living becomes more popular it’s fair to say that dual-keys will become more accepted and the resale market will continue to grow.

So, while they are a relatively new style of investment available in New Zealand, there are genuine reasons why they’re becoming popular, which is worth knowing in terms of the re-sale market.

More from Opes:

• Apartments - Are they a good investment? (Article)
• Townhouses vs houses vs apartments - Which goes up in value faster? (Article)
• Standalone houses - Are they a good investment? (Article)

What do dual-key apartments look like?

Using the same Ellerslie property as an example, here’s what a dual-key set-up can look like.

The units have a shared entrance, which then flows into two separately lockable apartments. Hence the name: Dual-key.

So, as you enter the door to your dual-key from a corridor, you are met with a small lobby space of about 3sqm.

To your right is the 1-bedroom unit; turn to the left for the studio.

Each apartment has exactly what you would expect of a separate dwelling – its own bedroom (or bedrooms), living area, kitchen and bathroom.

Dual-key apartment example

To give another example, Opes recommended some “off-the-plan” dual-key apartments in Dixon Street, Wellington back in March 2017.

At the time the apartments cost $525,000.

There were big delays, and the development took an extra two years (4 years in total) to complete, but the value had ballooned during the construction period to $840,000.

That’s a 60 per cent ($315,000) increase over just 4 years and 2 months.

Despite this being a large amount of growth, it was still 20% slower than the surrounding Wellington market. (Remember, dual-keys don’t increase in value as quickly as other properties).

During this period dual-key apartments grew 10.8% per year while the overall Wellington market lifted 12.2%, according to the REINZ House Price Index.

However, let’s think about the rental income and yield within the same period.

When the apartments were first advertised, the rental income was estimated at around $650 per week.

By the time they were finished they were renting for between $1,000 and $1,200 per week. That’s a 7.4% gross yield.

Where are dual-key apartments being built?

As higher-earning, yield apartments, dual-keys are found in the central suburbs of a city, which is where the rental demand makes sense for them to be.

In Auckland those are areas like Newmarket, Ellerslie and Parnell, which are close to the CBD and have great access to public transport and are near all the amenities like shopping malls.

Who is a dual-key apartment the right fit for?

The flexibility of these units makes them an attractive option to investors who are looking for a high-yielding option to add to their portfolio.

These tend to be older investors, or those looking to slow down from work and use property to supplement their income.

However, if you are building your wealth dual-key apartments can still be used in your portfolio. Some investors will use these properties to top up other properties in their portfolio that are negatively geared.

In other words, if you own a townhouse that is negatively geared by $100 a week, you might buy a dual-key apartment that earns $100 a week. This way the yield property pays for the growth property’s contributions.

While it's cheaper to buy a dual-key, rather than to buy two units separately, it still requires more to invest. So, these tend to be a good fit for investors who can afford to spend a bit more on an investment property and are looking for yield.

Who is a dual-key apartment the wrong fit for?

Not every dual-key is a good investment

All things considered, dual-key units can be an attractive option for investors.

More flexibility and more potential income make them a good investment for different reasons. But it is important to note that not every dual-key will automatically be a great investment for every investor.

Ultimately, it comes down to the numbers and being able to sort the good investments from the bad.

That’s why, here at Opes, we work with 58 developers from around NZ to find the right properties for Kiwi investors. And then once we find them, we rigorously run the numbers to offer good investment properties to our investors.

To find out more about how we find quality investment properties for investors, click here to read about our property investment programme.