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.
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.