Promoted Content

The 5 key ongoing expenses of property investment

By Momentum Wealth

Promoted by Momentum Wealth

When starting your property journey, it’s all too easy to get so overly focused on the cost of acquisition you fail to look at the holding costs.

While calculating the cost to acquire a residential investment property is essential, you must also actively look into the expenses you’ll have once you take ownership of your new investment.

After all, if you can’t afford the ongoing expenses of your property you may be forced to sell. Forced sales usually come at a hefty price as stamp duty on acquisition and selling fees are essentially net losses.

So before you dive in, let’s look at the 5 key ongoing expenses investors in residential property need to be aware of: 

  • Mortgage repayments. Usually the biggest ongoing cost will be your new mortgage, so buy a property that will suit your budget. For example, if you have a small disposable income, you might have to trade some capital growth rate for higher rental yields, as this will help cover the mortgage repayments and ensure you can keep the property in the long run. Ifon the other hand you have a larger disposable income, you might instead opt for a property with a higher capital growth outlook but a lower rental yield. A crucial question to ask yourself prior to starting the buying process is whether your prime consideration is capital growth or rental income, and whether or not you can afford your chosen strategy, as this will guide your property research.

  • Property management fees. Having your property managed professionally comes at a cost, which can vary significantly across the different states and even between different companies in the same state. Bargain hunting however is never a good idea, as you often get what you pay for.A good property manager should provide advice on what you can do short and long term to maintain and improve your property, to maximise its appeal to tenants and its capital value.Remember that property management fees are tax deductable and that the value of a discounted fee can disappear quickly if an overloaded or inexperienced property manager causes you additional costs; for example, in the form of an extended vacancy at your property.

  • Insurance. Before even embarking on the journey of property investment, make sure you have considered all your insurance options and requirements. Landlord protection insurance, income protection insurance and life insurance are just a few examples of the types of policies that you will need to consider. They are essential to protect yourself and your property over the course of your investor life, and they come at an annual or monthly cost which you must take into account.
  • Maintenance costs. Owning a property will inevitably come with costs, so it is advisable you set aside some funds for annual maintenance. This could be anything from gutter cleaning to replacing an old hot water system. This is even more important if your property is a separate dwelling (like a house) as they typically come with more maintenance requirements than an apartment. For some property features, such as swimming pools, you’ll save money and stress long term if you pay for the ongoing maintenance rather than expecting the tenant to carry it out. This helps to protect the value of these features and prevent any issues from escalating and becoming more expensive longer term.

  • Strata fees. Apartments and townhouses will often employ a strata management company, which means you will need to pay strata fees. Typically these are paid by the landlord and not the tenant. They are used to maintain the common areas within the complex, such as lifts, pools and gardens. The more features the complex boasts, the higher strata fees will typically be.

It is important investors take the time to understand the full holding cost of a property prior to committing to a purchase. By taking the time to budget and run the numbers when planning your next acquisition, you will be in a much stronger position to proceed because you will be able to foresee costs and plan for them.

Unfortunately some investors regard maintenance buffers, insurance and property management as unnecessary expenses. Be aware of the heightened risk you are taking if you do not protect yourself.  In reality, by spending a little now you can save a lot of money in the long run and avoid unexpected costs.

If you would like to receive more property investment tips and advice, subscribe to the Momentum Wealth monthly newsletter. It comes packed with tips and advice for property investors. By subscribing you will also be held up to date with our latest research reports.

Momentum Wealth is a research-driven, full-service property investment consultancy dedicated to helping clients build multi-million dollar property portfolios.

We offer a premium, advice-driven service helping clients in the planning, financing, acquisition, development and management of their residential and commercial investment properties.This holistic service offering provides a one-stop shop for clients to accelerate their wealth and reach their property investment goals sooner.

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podcast

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  string(72) "mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option"
  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

" ["fulltext"]=> string(818) "

To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

    \r\n
  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
  • How the mortgage division supports the overall business of Rethink Investing<\/li>\r\n<\/ul>","clientImage1":"images\/podcasts\/Son-Pham.jpg","clientUrl1":"https:\/\/rethinkinvesting.com.au\/","clientName2":"OpenCorp","clientDesc2":"

    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1186 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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