6 ongoing costs to keep in mind when investing in property

Published on June 17th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Knowing the ongoing costs that come with an investment property can help prepare you better manage your expenses. Looking beyond the purchase price can let you make a sound decision when it comes to your investment property. Here are 6 ongoing costs that come with an investment property.

1. Mortgage repayments and fees

The mortgage repayment and fees are one of the largest ongoing costs that you will face. The cost of your mortgage will differ from person to person based on the amount that you have borrowed and the interest rate that comes with it. There are also ongoing account keeping fees that you need to keep in mind to see if you will be able to afford the fees that come with your home loan. Using a home loan calculator can give you an estimate of how much it will cost you. You can also speak to a financial advisor or a broker to see if it will be affordable for you.

2. Repairs and maintenance

It is vital to have a budget in place for repairs and maintenance that your property might need. Using the 1% rule of thumb can help you create a buffer for maintenance and repairs. What this means is putting aside 1% of your properties value. If your home costs $500,000, you will need to put aside $5,000 to create a buffer.

3. Council rates

In order to maintain your property at a functioning level, you will have to consider the costs of council rates that take care of things such as garbage collection and other community facilities. This will differ from council to council based on where you purchase your property. Keep in mind that council rates can increase year on year.

4. State government taxes

Preparing your budget to handle the expenses such as state government taxes can help you manage the expenses that come with owning an investment property. This is usually a land tax and will vary from states and territories. Therefore, it will be useful to check which one is applicable to your case.

5. Property management fees

Property management fees vary from firm to firm, which means you can expect to pay anything ranging from 7% to 10% of your weekly rent plus GST. This is something that needs to be considered before hire a property manager. Property managers can be a good investment if you want to hire someone to manage your property by marketing it to potential tenants, the payment of rent and managing complaints and evictions.

6. Utilities

Utilities can play a major factor which is why it is vital that you check you are not buying property that exceeds your budget. Depending on the type of investment property that you have and the type of rental agreement you have, you will be liable for handling the utility expenses that come with your property.

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The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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