Investment Potential of Compact Dual-Key Condos

Dual-key condos have a well-established presence in Malaysia. In this article, we address crucial inquiries such as: ‘Who stands to benefit from owning a dual-key condo?’ and ‘Does investing in them make sense?’

While dual-key condos have enjoyed popularity in countries like the United States, Sweden, and Australia for a considerable time, they have gained increased traction among property investors in Malaysia more recently.

Amid Malaysia’s dynamic real estate landscape, some property developers are beginning to introduce new compact dual-key condos, with each unit encompassing roughly 300 sqft, resulting in a combined area of 600 sqft. This innovative housing arrangement has ignited conversations among investors about its potential as an investment strategy. This piece delves into the pivotal factors that play a role in the decision-making process when evaluating compact dual-key condos as an investment opportunity in Malaysia.

So, what exactly is a dual-key apartment?

To put it simply, a dual-key apartment is like having two connected apartments under one legal name. There are usually two main types of dual-key condos:

• The first type is more common. It has a shared entrance that leads to the main door. Inside, there’s a bigger apartment with either two or three bedrooms. But there’s also a smaller studio unit built into it. This studio has its own bedroom, living space, bathroom, and kitchen.
• The second type is made up of two separate units that share an entrance area. These units might be the same size, or they might be different. Each unit has its own lockable entrance and its own bathroom(s) and kitchenette.

Now that we understand what a dual-key condo is, let’s see how it can help with certain problems related to owning a home and how it can be a good investment.

Investor Persona and Affordability

Many people love compact dual-key condos because they’re affordable. Larger condos and apartments can be too expensive for many buyers. These smaller units provide a more budget-friendly way to get into the property market. Young couples, first-time investors, and those on a tight budget find these condos attractive because they cost less than the bigger ones.

Affordable Investment = Better Income

Compact dual-key condos are not only affordable but also great for making money. Even if bigger properties are too expensive, investors can still join the property market with these smaller units. Renting out both units or using one for rental income can bring in a steady stream of money, making it a smart move for investors.

Managing Investment Risks

Reducing risks is crucial for successful investments. Affordable compact dual-key condos naturally lower the financial risks compared to larger investments. This affordability is like a safety net, helping investors manage their investment mix better and handle potential challenges more easily.

Capital Appreciation and Market Demand

The low cost of compact dual-key condos matches the changing trends in the Malaysian property market. With more people looking for affordable places to live, these condos meet the needs of a growing group seeking comfortable yet budget-friendly homes. Beyond their current popularity, the possibility of the property’s value going up over time makes these condos a smart choice for a long-term investment.

The Potential of 600 sqft Dual-Key Units

Living in a 600 sqft dual-key unit is a chance to be smart and creative with your space. Even though it’s not big, it encourages a simple way of living that focuses on usefulness and thoughtful design. With good planning, these units can be used in different ways – for someone living alone, for a family with different generations, or to make extra money by renting it out. These small but versatile units inspire people to organize and use their space wisely. By using clever storage, flexible furniture, and smart layouts, residents can enjoy a small but comfy home that’s practical without giving up on comfort.

These are different ways to set up dual-key arrangements:

1. Compact Living: Each unit serves as a self-contained living space, with essential amenities compactly arranged for individual occupants.
2. Parent-Child Duo: One unit can accommodate parents, while the other is for an adult child or young couple, focusing on minimalism and shared resources.
3. Flex Space + Living: Utilise one unit as a flexible space for work, hobbies, or guests, and the other for daily living.
4. Solo Living + Storage: Each unit is designed for a single occupant, with clever storage solutions to maximise space.
5. Micro Rental Units: Rent out both units as micro-apartments, catering to individuals looking for efficient living spaces.
6. Cozy Retreat: One unit can be a cozy living area, while the other is a private retreat for relaxation and sleep.
7. Guest Suite + Essentials: Use one unit as a guest suite with basic amenities, while the other is the main living space.
8. Workspace + Rest Zone: One unit is transformed into a functional workspace, and the other is a restful living area.
9. Minimalist Living: Both units can be merged to create a minimalist living space with essential features.

Remember, with such compact units, maximising vertical space and adopting space-saving furniture and design solutions are crucial for any of these arrangements to work effectively.

Potentially better return on investment

Other than flexible living options, dual-key properties also appeal to prospective property buyers, such as a young couple looking to rent out part of their property, especially those who do not have the means to purchase a second property for investment purposes (Refer to the table above).

The property owner can choose to live in the main unit and rent out the sub-unit. The rental earned from the sub-unit should be able to subsidise part of the monthly instalment of the whole condo and boost cash flow.

If the affordability of a second property is not an issue, the buyer can also choose to rent out the unit to two different tenants and receive two streams of rental income.

Here’s an example of the rental income you can fetch:

Disclaimer: *The rental figures above are examples of how rental yield can be derived and does not reflect the actual rental figures of any specific dual key units.

Here’s how you calculate your rental yield:

Total Rental Yield – Monthly Instalment x 100% = Rental Yield

Lower overall cost

Starting from the potential saving to your overall cost of living if you live with your family members i.e. childcare cost, elderly care cost, and rental cost for your young adult child.

On top of that, when it comes to the initial purchase cost, dual key condos are legally a single property, therefore, it does not incur any additional stamp duty. You will be paying the water and electricity deposit for a single property.

Since both the main and sub-units are using the same facilities, you don’t have to worry about paying two maintenance fees that come with owning two separate properties.

As a landlord, it is easier for you to keep an eye on your rented unit and you’ll be maintaining repairs for a single property instead of two. You’ll also be paying one quit rent, one assessment rate and one fire insurance.

Alternatively, if you’re a small business owner or a freelancer who now works in a hybrid work environment and work from home frequently, you can choose to utilise the sub-unit as a home office setup, you can save money on a commute and still have a conducive working space.

Ultimately, should you buy a dual-key condo unit?

Tiny dual-key condos in Malaysia prove that being creative and affordable can work together in the property world. Lots of folks dream of having a home or investing in property, but it’s tough because it costs a lot. These condos fix that problem. They make it easier for more people to own property or invest. You can earn money by renting them out, lower the chances of things going wrong, and they match what people want. These condos are like a guide for folks who want a good investment that they can afford. As things change in the property world, these condos show a path for those who care about getting something good without spending too much.