Insights · Duplex · Investment
Dual Occupancy Rental Yield: How to Run the Numbers
Two rents on one title sounds like double the income. It's double some of the costs too.
Owners who keep both halves of a dual occupancy usually do it for yield. Fair enough. But the spreadsheet I get sent often counts two rents and one set of outgoings. Here's how I'd set the sums up so the answer means something before you commit to building.
Short answer
How do you calculate the rental yield on a dual occupancy?
Gross yield is the combined annual rent from both dwellings divided by the total cost, meaning land value plus the full build including demolition, site works and fees. Net yield subtracts outgoings first: rates, water, insurance, repairs, management, vacancy and land tax. Many costs rise with two dwellings. A new build also earns capital works deductions of 2.5% a year, which help after-tax returns.
Written and reviewed by Oliver Alameri
Licensed builder, NSW Contractor Licence 487805C · Founder, Buildana
Fact-checked
Get the cost base right first
Yield is only as honest as the number underneath it. For a dual occupancy you already own the land for, that number is the land's current value plus everything it took to build: demolition, asbestos, design, approvals, construction, driveways, landscaping, service connections, contributions, finance costs during the build.
Leave the land out and the yield looks spectacular. It's also fiction, because you could sell that land tomorrow and invest the money somewhere else. The land has an opportunity cost whether you paid for it last year or inherited it.
For construction itself, Rawlinsons' 2021 Sydney tables put medium-standard two-storey townhouse construction at $2,115 to $2,280 per square metre. Prices have moved up since, so read it as the bottom of the range, not a quote.
The costs that double, and the ones that don't
Some outgoings follow the number of dwellings. Two hot water systems, two kitchens, two sets of appliances to replace in time. Repairs and maintenance roughly double. Property management fees are a percentage of rent, so they scale with income. Vacancy risk is spread over two tenancies, which is actually a plus: one empty side still leaves one paying.
Others depend on how the property is held. Land tax in NSW is assessed on land value, so two dwellings on one undivided lot don't create two land values. Subdivide into two Torrens titles and each lot is valued on its own. Council rates and water service charges can also change with subdivision, and each council treats dual occupancies a little differently.
Insurance is usually two policies or one landlord policy covering both. Get a real quote. Don't guess.
- Doubles: maintenance, appliances, hot water, fittings
- Scales with rent: management fees, letting fees
- Depends on title: land tax, rates, water charges
- Often better with two: vacancy risk
Want the build cost side of your yield sum?
Give me the address and the kind of dual occupancy you're thinking about. I'll provide an all-in cost range so your yield calculation starts from a real number.
0476 300 300A worked example, with made-up numbers
These figures are illustrative only. They show the method, not a forecast for your street.
Say the land is worth $1,000,000 and the full build, all-in, costs $900,000. Total cost base: $1.9 million. Each dwelling rents for $800 a week. That's $83,200 a year combined. Gross yield: about 4.4%.
Now outgoings. Say rates, water, insurance, management at 7%, repairs and a couple of weeks' vacancy each total $18,000 a year. Net rent is $65,200. Net yield: about 3.4%. Before interest, before tax, before any land tax.
Change one input, say the build runs $100,000 over, and the net yield drops to around 3.3%. That's why the cost base is the number to lock down.
Leave the land out of your yield sum and you'll convince yourself of almost anything.
Depreciation is where new builds pull ahead
A brand-new dwelling earns a capital works deduction of 2.5% of the construction cost each year for 40 years. On $900,000 of eligible construction, that's around $22,500 a year you can claim against income, even though no cash leaves your account.
New plant and equipment, like hot water systems, air conditioners, carpets and appliances, can be depreciated separately. Rules tightened in 2017 for second-hand assets, which is exactly why new builds have the advantage here.
Get a quantity surveyor's depreciation schedule after handover, and talk to your accountant. I'm a builder, not a tax adviser, and your situation will differ.
Where the yield argument falls apart
On very expensive land. Yield is rent over value, and in suburbs where the land alone is worth several million, two rents rarely add up to much of a percentage.
When the build overruns. Every dollar of variation sits in the denominator forever.
And when the design is wrong for tenants. Three bedrooms and two bathrooms each side, sensible storage, a car space and a small private yard rent reliably. Unusual layouts and luxury finishes often don't earn their cost back in rent.
Before you build to keep both halves
Settle these numbers before signing a build contract.
- 01
Current market value of the land, from a valuer or agent
- 02
All-in build cost, including site works and fees
- 03
Realistic rent for each dwelling from local agents
- 04
Outgoings: rates, water, insurance, management, repairs
- 05
Land tax position before and after any subdivision
- 06
A depreciation estimate and your accountant's view
Dual occupancy yield questions
What is a good rental yield for a dual occupancy?
It depends on land values. In middle-ring Sydney suburbs, gross yields in the low-to-mid single digits are common. Always compare net yield after outgoings, not just the gross figure.
Should I subdivide or keep one title?
Subdividing lets you sell or refinance one half separately, but it can change land tax, rates and strata or Torrens obligations. Weigh the flexibility against the ongoing costs.
Do both sides need separate meters?
For a rental, separate electricity and water metering makes billing tenants straightforward and is expected if you ever subdivide. Plan it into the build from the start.
Is a dual occupancy better than a house and granny flat for yield?
That comes down to your land and your local rental market. A granny flat costs less to build, while a dual occupancy produces two full-size rents and can be subdivided. Run both scenarios on the same land value.
Sources and references
Costs are from the Rawlinsons handbook with the local cost index applied; rules and timeframes are checked against the sources below.
Build it once, with the numbers already checked.
A dual occupancy designed around what tenants in your suburb actually rent.