Cost Considerations
An investment property has many benefits and if chosen carefully can provide solid financial returns. However, it can also be an expensive asset to acquire and maintain.
There is not just one overall cost of investing in property but many initial and ongoing costs which need to be taken into account when taking the plunge.
No matter what type of investment property you’re after, there are important costs outside of the deposit and investment loan you should be aware of.
We will assist you to factor in these costs when you begin your investment journey so you’re not hit with any surprises later on.
|
EXPENSE |
FREQUENCY |
NOTES |
|
DEPOSIT | Once Only Payment |
The deposit needed to purchase an investment property is 10% of the asking price. However, if you borrow in excess of 80% of the property value, you maybe required to pay mortgage insurance. |
|
LOAN |
Once |
Some financial institutions will charge an establishment fee to cover the set-up costs for your loan. Consult your financial institution to determine establishment fees |
| MORTGAGE INSURANCE |
Once |
If your deposit is less than 20% of the value of the property, the lender may require you to pay mortgage insurance. Consult your financial institution to determine likely costs to insure your loan. |
|
CONNECTIONS |
Once |
The cost of the connections for all the utilities and services you will need to have installed in preparation for the tenants who will be occupying your property. |
|
LEGALS |
Once |
This cost covers the legal transfer of ownership. This is usually conducted by a solicitor or conveyancer. It may cost approximately $600-$1800. |
Estimating ongoing costs can be a difficult task as they may vary from month to month and year to year.
It is important to allow for the following costs you may incur as well as any extras which may arise.
|
EXPENSE |
FREQUENCY |
NOTES |
|
INSURANCE |
Annual
Payment
|
Building and landlord insurance will not only protect you from unforeseen building repairs (from fires or flooding) but also common tenant problems i.e. damage, tenant refusing to pay rent, leaving the property prior to the agreement’s finishing, etc. |
|
YEARLY |
Annual |
Your loan may be subject to a yearly loan account fee. It is important to consult your financial institution to determine if this is applicable. |
|
LAND TAX |
Annual |
This cost is the annual tax levied on the owners of the land. Land tax may be exempt in certain cases, however, when purchasing a property as an investment you will be liable. Land tax is levied by states and territories. |
|
COUNCIL RATES/ |
Annual |
In most instances, council rates and government taxes will be the responsibility of the landlord. These rates will vary from state to state. |
|
BODY |
Quarterly |
If your property resides on a shared block (e.g. is a townhouse, unit or flat), it is likely to incur owner’s corporation fees. These fees cover the maintenance of common areas as well as building insurance. The fees will depend on the condition of the property, its features and the area. |
|
MORTGAGE |
Monthly |
Although the rental payments you receive may cover most of your monthly mortgage fees, you may need to contribute and cover the shortfall. You will also need to keep up with the interest costs on the borrowings of your property and consider the impact of a rate rise. |
|
UTILITIES |
Monthly |
You will also be responsible for the cost of any services which do not have separate metering devices like water, as well as the annual sewerage charges. |
|
PROPERTY |
Monthly |
If you have decided on seeking an expert to manage your property, their commission or fees will need to be considered. These fees may vary from state to state |
|
REPAIRS |
Ongoing/varies |
As the owner, you will need to maintain the property. Maintenance of a property may be partly tax-deductible, however, it is important to double-check what you can and cannot claim. |
Putting all the pieces of the puzzle together can be daunting.
Working together as a team with our professionals will ease the process.
