26 Jun 2018
Pros and Cons of Owning a Dual Key Unit
In recent years, some of the new condominium launches are coming up with dual key concept units.
So what is a dual key unit?
Simply put, a dual key unit is where a property is divided into two sub-types. For instance, a dual key unit may consist of a studio unit together with a one-bedroom unit. The two units usually only share a common foyer or entrance through which all occupants can enter. This allows one space to be shared by different parties.
The advantages of acquiring a dual key unit are:
- It allows the owner to stay in one part of the dual key unit and at the same time able to rent out the other part. Yet, the owner is still able to enjoy his/her own privacy. The rental income will be able to help pay off part of the monthly mortgage loan instalment at the same time.
- It could be a good arrangement for multi-generational families. It allows the owner to stay in one part of the dual key unit and the extended family to stay in the adjoining unit. And yet the owner is still able to enjoy his/her own privacy.
- Rental yields for dual key units are usually higher than conventional units of the same size too. Actual transactions at the Flamingo Valley Condominium in Siglap have shown this to be true.
For example, let’s compare the current rental rates for an 800 sq ft dual key unit that contains a studio unit and a one-bedroom unit with a conventional 800 sq ft two-bedroom unit.
The studio unit can be rented out at $1,500/month and the one-bedroom unit at $1,800/month. That’s a total of $3,300/month.
However, for the two-bedroom unit, the average monthly rent amounts to $2,500-$2,800/month.
So it’s clear that the dual key unit has a much higher rental yield for this instance.
However, dual key units come with their own setbacks as well:
1) It caters to a very niche market. When it comes to reselling a dual key unit, the number of buyers may not be as high as buyers looking for a normal two-bedroom or three-bedroom unit.
2) If you have rented out both the units inside the dual key unit, showing the entire dual key unit to potential buyers could pose a challenge. It may take a lot of coordination to ensure that both tenants are present for the viewing.
3) Dispute management between tenants could get tricky too. While there’s no doubt that both tenants have their own private units, the two tenants may have some disagreements. For example, one of the tenants may clutter up the common foyer, be too noisy, or hike up the electricity and water usage.
The owner has to prepare some guidelines to ensure that both tenants live in harmony. Otherwise, it can be a huge hassle every month to manage the two tenants.
In all, every property comes with its upsides and downsides, including dual key units. Always weigh both the pros and cons before jumping into the investment and remember to have an exit plan too.
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