Understanding costs as an investor - know what you're up for
An investment property has much the same initial costs as a property you live in, but there are a few ongoing costs you need to have on your radar.
Processing your loan takes some work, and the banks charge you for it. It varies from bank to bank – and some even waive it – but others charge as much as $800.
This is a state government tax on your property. How much you have to put forward depends on which state you live in and the price of your property.
Mortgage insurance (LMI)
This is to protect your lender if your loan is deemed high risk - typically when borrowing more than 80% of the purchase price. The bigger the deposit, the smaller the fee.
Loan establishment fees
Some lenders, not all, will charge an establishment fee to cover the administration costs of setting up your loan.
There is a fee to legally transfer the ownership of the property. This is usually done by your solicitor or conveyancer, but you still need to pay the fee.
Building and pest inspection fees
It’s definitely a thing. Usually around $300-$600. This inspection ensures your building structure is sound, undamaged by pests, and termite-free!
You never know what's going to happen, so it’s good to have building and landlord insurance. No one wants red wine stained carpet or tenants who won’t pay rent.
Generally this is paid annually and is levied on the owner of the land.
If your total rental income is more than the cost of owning and managing the investment property, then you will find you have money left over and chances are, you will be taxed on this (positive gearing).
Council rates & strata fees
All councils differ, however you can't get around this one, so keep this fee in mind when purchasing a property. Similar fees will also apply if your property is part of a shared block to cover the maintenance of the building.
If you have someone managing your property, then you will need to consider the fees they charge for this service.
Being an owner means you will need to put money towards maintaining the property and ensuring it remains in good condition.
If you have any questions around these fees or different ways to minimise some of these costs when it comes to your loan, please give me buzz so we can discuss.