So you’re now at the point where you are seriously looking to buy an investment property. There are a lot of costs to take into consideration when investing – some are obvious and others sneak up on you unexpectedly… here are key ones to note:
Mortgage repayments – Are you paying interest only or principal as well? You’re generally best to pay interest only if you have a mortgage on your own home – try to pay that off first because the interest you pay is tax deductible where as principal isn’t. Are you on a fixed or variable rate and for what term? Always factor in potential interest rate increases.
Fixed costs – Including council rates (the average council rates in Mudgee for residential homes are between $1500 and $1800 per annum), strata levies and sinking funds for units and townhouses that share communal property, land tax (if applicable), stamp duty (if applicable) and lending fees (talk with your mortgage broker or lender about the fixed costs associated with your chosen mortgage).
Property costs – These can include things like regular maintenance and upkeep of the property, repairs and property insurance.
Leasing costs – The first cost will be the letting fee, but you will also pay a monthly fee to your property manager which we’d be happy to talk to you about a professional management package to suit your needs, including our multi-property discount. We also recommend that all of our landlords consider taking out landlord insurance that will cover various things should there be unforeseen issues with the tenant or property.
Budgeting – Because there are a number of expenses associated with investing in property, you should make sure you have done your homework. It’s a good idea to keep funds aside for a the unexpected, but it isn’t always practical to do so, so having a budget for the unexpected, such as replacing heating/ cooling appliances, flooring, plumbing, water heating and roofing is advised.
– Did you know that there are tax benefits to investing in property
? Repairs and maintenance, depreciation, interest payments and other costs associated with your investment property are generally tax deductible. The cost of renovating or improving the property isn’t deductible, but if you choose the right investment property, you can really capitalise on the tax benefits. Always talk to your tax accountant about what you can and can’t deduct.
Our final piece of advice for property investors is to make sure you always have your paperwork handy. Knowing what your income and expenses thoroughly will help put you in a good position for your investment planning.
* This advice has been put together without taking your personal circumstances into consideration and is meant for general guidance only. Always consult professional advice from a trusted and certified practitioner before entering into any financial commitments.