Ongoing costs of property investment
Structured properly and purchasing the right property investment, in the right area at the right time, the initial on-going costs of owning an investment property should be less than the total income after tax. The largest cost is normally the interest on the investment loan (normally an interest only loan) so you have to consider:
- Loan repayments
- Council rates (usually no land tax for first time personal investment)
- Water rates
- Insurance
- Body corporate fees (if the investment property is a unit or strata’d townhouse/villa)
- Repairs and maintenance costs (absolutely minimal if you buy new investment property)
- Property management fees (to the company looking after the rental)
It’s also important to leave yourself a little ‘safety net” when purchasing your property investment. Keep some equity or cash left over It might be tempting to go all out and tip your life savings into your investment portfolio – but that would be short sighted and it may come back to bite you. Investment loans or home loans are susceptible to change, both inside and outside of your control. It is important to maintain a buffer for emergencies such as short periods of vacancy or minor repairs or even if your income becomes subject to an unforeseen change.
Bottom line in all of this is seek professional guidance in purchasing your investment property and don’t attempt to do it all by yourself, particularly as a first or second time buyer.
