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:
- Home
- Home Loans
- Property investment
- Planning to invest
- Investment property costs
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.
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-$300.
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 to figure out what you might need to pay.
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 (LMI) which involves a single premium based on the amount you borrow relative to the property's value. LMI applies if you borrow 80% or more of the purchase price.
Talk to a Mortgage Choice expert
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. Find out more about conveyancing here or download our 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:
- Accountant/ tax agent fees
- Body corporate fees
- Council and water rates
- Insurance - landlord insurance offers a comprehensive level of protection for investors
- Lease expenses including legal fees for drafting leases
- Land tax
- Letting and re-letting costs - including advertising costs
- Loan interest - factor the possibility of higher repayments into your budget if you use a variable rate loan
- Management fees paid to real estate agents - expect to pay around 7% of the gross rental
- Repairs and maintenance including cleaning or gardening costs