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Just like with any investment, it's important to not only understand your initial outlay, but any ongoing costs that can arise.

Here are some of the more common costs associated with an investment property.

 

Purchasing an Investment Property

Aside from the deposit, there are other costs involved when buying a home. Here are some of the most common fees to be aware of:
 

  1. Stamp duty
    Stamp duty is a state and territory government tax based on the purchase price of the property. It’s paid to the state or territory the property is in, which means the amount you’ll need to pay will vary depending on where your property is located as well as on the price of the property.
    Stamp duty is often a significant cost, so it’s vital you take it into account when working out your costs. Our upfront costs calculator can give you an indication of how much stamp duty you could have to pay as well as other costs to consider when buying.

  2. Building and pest inspections
    Although these may seem expensive, the price you’ll pay for these reports could be a fraction of the cost (not to mention headache) if you end up with pest infestations or building issues after you’ve bought. In some cases you may be able to combine both the pest and building inspection, which should help to keep costs down.

  3. Legal costs
    There are several legal steps involved with buying a home, so make sure you engage a solicitor or conveyancer. These include:
    • Completing a property and title search to make sure the seller is legally entitled to sell and that there are no encumbrances on the property.
    • Arranging a strata inspection and checking the strata body corporate records if you’re buying a property that’s part of a strata scheme.  An example of a red flag to watch out for would be a substantial increase in levies. This could signal that something is about to happen that would require more funds).
    • Reviewing and exchanging the contract of sale.
    • Arranging to pay stamp duty.
    • Overseeing the transfer of the title of the property from the seller to you.

  4. Mortgage establishment fees
    Depending on your lender and your loan type, there may be various fees to establish your mortgage. These could include an application fee as well as valuation and settlement fees.

  5. Title transfer fee
    The title transfer fee is a state/territory government fee for transferring the property title from the seller to the buyer. The cost can vary significantly depending on what state or territory the property is in – you can find details of the charges on the website of the state/territory revenue office.

  6. Mortgage registration fee
    This is another state or territory fee. As a property is the security for the mortgage, the state/territory government needs to register the home loan so that any future buyers can check for any prior mortgages on the property.

 

Maintaining an Investment Property

Other than regular loan repayments, the most common ongoing costs related to owning an investment property include:

  • Council Rates - Usually paid quarterly, these rates help fund local infrastructure and services.  In general rates are calculated based on land valuations and rating categories.
  • Utilities - As a landlord, you may also be liable to pay for utilities such as water rates.
  • Landlord and/or building and contents insurance.
  • Body Corporate/Strata Fees – If you’re buying an apartment or townhouse, these fees may be applicable, and fund the maintenance of the building’s common areas, building insurance etc.
  • Repairs and maintenance.
  • Property Management Fees – Some property investors choose to manage their investments themselves, or otherwise they hire a third party to do so.  A property manager is someone hired to manage the day to day operations of your investment property.  Some responsibilities include finding tenants, collecting rent and dealing with maintenance and repair requests.   A property manager will also maintain records regarding the property including signed leases, records of maintenance and repairs, rent collection and insurance.
  • Tax on rental income.

     

     

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This information has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and, if necessary, seek appropriate professional advice. Read the terms and conditions before making a decision if the product is right for you.