Feasibility Duplex NSW

	Duplex (Double Storey)
Location	NSW
Total Floor Area	350 m²
Land Size	603 m²
Contract Type	2-Part (Land + Build)
Purchase Price	$1,460,000
- Land	$660,000
- Build	$800,000
Stamp Duty & Costs	$28,000
Total Project Funding	$1,488,000

Project funded 100% via equity loan on existing home (interest-only, 6.3%).

💵 Loan Details

Component	Amount	Notes
Land Loan	$660,000	Settled upfront
Construction Loan	$800,000	Drawn progressively (9 months)
Stamp Duty & Costs	$28,000	Rolled into loan
Total Loan	$1,488,000	All debt-funded (IO @ 6.3%)

📊 Year 1 Financial Breakdown (Post-Tenanting)

🔹 Income

• Gross Rent (Annual): $78,000

🔹 Expenses

Expense	Amount	Notes
Interest @ 6.3% (IO)	$93,744	On full $1.488M
Property Management (7%)	$5,460	% of rent
Maintenance	$1,000	Estimated
Council Rates	$3,000	Estimated
Total Expenses	$103,204

🔹 Pre-Tax Cashflow

• Shortfall: $78,000 – $103,204 = –$25,204/year

  
  

  (equivalent to ~–$485/week)

• 
  

💼 Tax Benefits

🏗️ 1. Depreciation Deduction (Year 1)

• Depreciation Claim: $32,000

• Tax Refund (45%): $14,400

  
  

🧾 2. Negative Gearing – Cashflow Shortfall

• Deductible Loss: –$25,204

• Tax Refund (45%): $11,342

💰 Total Year 1 Tax Refund

• $14,400 (depreciation) + $11,342 (cashflow loss)

  
  

  = $25,742 total tax refund

✅ Final Net Holding Cost (After Tax Refund – Year 1)

• Pre-Tax Cashflow Shortfall: –$25,204

• Total Tax Refund: +$25,742

• Net Result: +$538/year (positive)

• Equivalent to ~+$10/week

Despite full debt funding at 6.3%, depreciation and negative gearing combine to make the property effectively cashflow-neutral or slightly positive in Year 1 at their tax bracket.

📉 10-Year Depreciation Phase-Out (with Tax Effect)

Year	Rent ($)	Mgmt Fee ($)	Depreciation ($)	Pre-Tax CF ($)	Tax Refund  (Depreciation) ($)	Tax Refund  (Loss) ($)	Total Tax  Refund ($)	Net Cashflow  After Tax ($)
1	$     78,000.00	$5,460.00	$32,000.00	-$  25,204.00	$  14,400.00	$11,341.80	$     25,741.80	$   537.80
2	$     81,900.00	$5,733.00	$30,000.00	-$   21,577.00	$ 13,500.00	$  9,709.65	$    23,209.65	$   ,632.65
3	$     85,995.00	$6,019.65	$28,000.00	-$ 17,768.65	$12,600.00	$ 7,995.89	$ 20,595.89	$   2,827.24
4	$     90,294.75	$6,320.63	$26,000.00	-$13,769.88	$  11,700.00	$      6,196.45	$   17,896.45	$   4,126.56
5	$     94,809.49	$6,636.66	$24,000.00	-$ 9,571.18	$10,800.00	$ 4,307.03	$   15,107.03	$   5,535.85
6	$     99,549.96	$6,968.50	$22,000.00	-$ 5,162.54	$9,900.00	$ 2,323.14	$                 12,223.14	$ 7,060.61
7	$  104,527.46	$7,316.92	$20,000.00	-$ 533.46	$9,000.00	$  240.06	$                    9,240.06	$   8,706.60
8	$  109,753.83	$7,682.77	$18,000.00	$  4,327.06	$ 8,100.00	$                                         -	$  8,100.00	$    12,427.06
9	$  115,241.52	$8,066.91	$16,000.00	$ 9,430.62	$ 7,200.00	$                                         -	$ 7,200.00	$ 16,630.62
10	$  121,003.60	$8,470.25	$14,000.00	$14,789.35	$ 6,300.00	$                                         -	$ 6,300.00	$ 21,089.35

The property becomes gradually more positively geared over time as depreciation reduces and rent increases. Of course, many other factors are needed to be included like, land tax, further maintenance etc. Steve & Melissa could plan to reduce debt via offset funds, increase rent, or occupy one unit to reduce outgoings later.

🧭 Final Strategy Snapshot

Category	Detail
Total Investment	$1.488M (including stamp duty & costs)
Funding Method	100% equity-funded, interest-only loan at 6.3%
Tax Bracket	45% (high-income household)
Net Cashflow (Year 1)	Slightly positive due to tax benefits
Tax Benefits	Strong in early years via depreciation + negative gearing
Long-Term Use	Move into one unit in 10 years, rent/sell the other
Exit Plan	Sell family home, contribute part to SMSF, part to offset

📝 Summary

Steve and Melissa have used the equity in their family home to fully fund a $1.488 million duplex investment without any out-of-pocket costs. Despite borrowing 100% of the funds at a 6.3% interest-only rate, the combination of strong rental income, depreciation benefits, and negative gearing results in a neutral or slightly positive cashflow position in the first year.

With $32,000 in depreciation and a high marginal tax rate (45%), they receive over $25,000 in combined tax refunds in Year 1—effectively offsetting their holding costs. As depreciation gradually reduces over 10 years, their strategy allows for adjustments like rental increases, offset savings, or transitioning into one unit to reduce expenses.

In 10 years, their plan is to sell the family home, contribute part of the proceeds to their SMSF, and place the rest into an offset account to reduce interest. They’ll then move into one side of the duplex and continue earning income from the other—creating a stable, flexible setup for retirement with long-term capital growth and cashflow upside.

This case highlights how a well-structured duplex project—backed by smart financing and tax planning—can serve both as an investment and a lifestyle strategy.