Five costs to think about before buying an investment property
So you’ve done the maths and decided an investment property is a possibility.
While the bank may have agreed to loan you the cost of the house, there are other expenses to consider.
Here are five costs to think about before buying an investment property.
Stamp duty is the biggest cost associated with buying a house, not to mention it’s one you have to pay for out of your own pocket.
Stamp duty tax is determined by state or territory governments and is required to be paid before settlement.
However, first home buyers are currently exempt from paying stamp duty on homes up to $650,000. Talk to one of our advisors about making the most of the benefits currently available.
Contracts for sale of land are always drawn up by a solicitor on behalf of the vendor, so it’s worth paying for a solicitor to look over your contract.
Common problems that might arise within a contract include: illegal renovations, property measurements not matching, to name a few.
The cost of a solicitor could cost you between $1,000 to $2,000, plus searches, for your property purchase.
Pest and building reports
These vary in price but a pest and building report should be done before making a purchase. If you’re buying a unit, you’ll also want a strata title search.
Insurance is vital when buying an investment property.
First of all, if you have less than 20 per cent deposit, the bank will require you to take out Lenders Mortgage Insurance. This type of insurance protects the bank – not you – in the event that you can’t meet the loan repayments and the net proceeds of an enforced sale of the property would not be enough to cover the loan.
Landlord’s insurance is also a necessity. This will protect your house or apartment and rental income.
Shop around for a good home and contents insurance policy to cover structure and everything inside your dwelling.
Hire a property manager to help look after your asset. They are experienced at finding good tenants and have systems in place to collect rent effectively, saving you time and hassle.
Lastly, a property manager will ensure you, as a landlord, are acting in compliance with housing regulations and property laws.
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