It is important to understand and calculate the ancillary costs of buying, holding and selling an investment property so you are financially capable of starting your property investment journey and build wealth over time.
In this blog, we list some of the most common costs across the three stages of the property investment journey: buying, holding and selling.
1. Buying Costs
If you are borrowing money to invest you have to consider the home loan fees. Common fees include loan establishment fee, ongoing (annual) fees, break costs, interest repayments and lenders mortgage insurance if your deposit is less than 20%.
Other common costs with buying an investment property are legal/conveyancing fees, stamp duty, pest and building inspection reports and quantity surveyor fees.
Buying an investment property is a big and important financial decision so to minimise risk and maximise return consider partnering with qualified professionals to do some of these tasks for you and offer advice where needed. These might include a qualified property investment advisor, accountant, financial advisor and mortgage broker. Shop around to compare fees and services so you can get the best value provider for your circumstance.
2. Holding costs
There are ongoing costs associated with owning a property and these might include but are not limited to:
- Interest repayments
- Property manager
- Property insurance: building and landlord insurance
- Personal insurance: Income protection and life insurance
- Maintainance and repair costs
- Land tax
- Council rates
- Connection of utilities (electricity & gas)
- Body corporate fees
- Online advertising to find new tenants
The cash flow alone sometimes is not enough to cover the holding costs of an investment property, let alone unexpected expenses that do arise. Having a budget to create a consistent cash buffer and savings will help you plan for the unexpected, and act as your personal and investment safeguard.
3. Selling costs
If your property has increased in value at the time of sale, you will have to pay tax on the profit you’ve made, also called capital gains tax. Other costs to consider when selling are real estate agent’s fees, advertising costs and legal fees.
You might still have some questions about the costs of investing in property so don’t hesitate to get in touch. We offer an initial 60-minute free consultation session to help you get started with your property investment journey. Email us at firstname.lastname@example.org to book your session.