Investment property costs

An investment property involves two main sets of costs - upfront purchase expenses, and the ongoing costs required to own and maintain the place.

Upfront purchase costs

Some upfront costs can be claimed as an ongoing tax deduction. For more details, see our section on tax considerations and gearing. As a guide, your upfront purchase costs can include:
1

Pre-purchase pest and building inspections

These are essential to avoid any nasty surprises like building defects, illegal work or pest problems that could be expensive to fix. Allow around $400 for an inspection by a reputable firm.

2

Strata search

If you’re investing in a unit, apartment or townhouse, a strata search is essential. It will identify whether there are existing disputes within the building, if there are outstanding repair bills, or if the quality of repairs has been sub-standard. A strata search can cost around $250.

3

Stamp duty

Stamp duty is a state government tax based on the price paid for the property. The cost of stamp duty is added to the capital value of your property, so it will reduce any capital gains tax that may apply when you sell your investment.

See our stamp duty calculator

4

Borrowing costs

These may include a loan application fee (allow up to $700), lender's valuation fee of approx. $300, and Lenders Mortgage Insurance which involves a single premium based on the amount you borrow relative to the property's value. It applies if you borrow 80% or more of the purchase price.

Need help doing the calculations?

Contact us online

Legal fees

Also known as 'conveyancing' fees, these cover the cost of having the property transferred out of the vendor's name and into yours, and is normally completed by your solicitor. The cost is usually upwards of $1,000 depending on who you use to do the conveyancing and the complexity of the transaction. For more information, check out our detailed conveyancing guide.

Ongoing costs

As a landlord, you’ll have a variety of expenses associated with owning and tenanting your investment property. Most of these costs can be claimed on tax (always check with your accountant), which makes the bills more manageable. See our tax and gearing section for more details.

Typical ongoing costs include:

  1. Accountant/ tax agent fees
  2. Body corporate fees
  3. Council and water rates
  4. Insurance -  landlord insurance offers a comprehensive level of protection for investors
  5. Lease expenses including legal fees for drafting leases
  6. Land tax
  7. Letting and re-letting costs - including advertising costs
  8. Loan interest - factor the possibility of higher repayments into your budget if you use a variable rate loan
  9. Management fees paid to real estate agents - expect to pay around 7% of the gross rental
  10. Repairs and maintenance including cleaning or gardening costs

Mortgage Choice broker tip

PropInvestPropcostsB1150.jpgReduce the chance of loss or the cost of making an insurance claim on your rental property by:
Installing deadlocks on doors and windows
Installing smoke alarms (a legal requirement in some states).
Providing a security system.
Following a regular maintenance program to reduce fire hazards such as leaves in gutters.

Thinking about an investment property? Talk to us today.

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