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When purchasing an investment property, there is much more than just the cost of the dwelling itself to consider.
Blogger: Bob Korver, owner, Mortgage Choice
There are several expenses that all investors should understand and be prepared for, including:
1. Pest and building inspections
When buying a property (regardless of whether it is for owner-occupied or investment purposes) it is vital to conduct pest and building inspections. A pest and building inspection can cost anywhere up to $700 depending on the company you go with. While $700 may seem like a significant expense, it is a small amount to pay for peace of mind and it can help you to avoid buying a property with faults.
2. Purchase fees
In addition to the pest and building inspection you have to pay for, there are certain fees and charges you will face, so it is important to factor these into your budget. Such fees can include:
As a property investor, it is important to have a reliable, trustworthy solicitor on your team. Your solicitor or conveyancer will play an integral part in the purchasing journey as they complete all of the legal work involved in purchasing real estate. Shop around and partner with a solicitor or conveyancer you have a good rapport with. Depending on your property investment plans, they could play a very integral role in your life, so it is important to work with someone you like.
Accountants are another important professional to have on your team. An accountant can help you make the most of the various tax incentives offered to property investors. While a good accountant won’t come cheap, they can be worth their weight in gold, so it is important to partner with a reputable accountant you trust.
5. Financial adviser
As a property investor, it is also worth using a financial adviser. Financial advisers will offer advice and guidance on the best investment decisions. They will help you to make your money work harder.
6. Property manager
While you can choose to manage your investment property privately, if you have a busy life or are wanting to build a significant property portfolio then it is worth investing in a good property manager. As their title suggests, a property manager will manage your property on your behalf and complete tasks like finding suitable tenants and collecting rent. Property management fees vary from agency to agency and can be anywhere between 4.5 and 10 per cent of the weekly rent.
As a property investor, it is important to properly insure yourself and your property. Landlords insurance, for example, will cover you from any financial losses connected with rental properties. Generally speaking, landlords insurance covers the building, with the option of insuring any contents that belong to you inside the premise.
These are some of the common costs associated with buying and owning an investment property. As you can see, there are some significant costs associated with this type of investment and it is important to factor them in to your budget. That said, at end of the day property investment can be a very lucrative investment strategy provided it is done correctly and you understand exactly what you are getting yourself in for.