Read on to find out more about a few common costs that investors need to know about.
Property investment is one of the best ways to build an income stream that will help you secure your future, but it doesn’t come without a cost. If you’re thinking about renting out your investment property, here are seven ongoing expenses you’ll need to cover.
You’ll want to put landlord insurance in place before you rent out your property. This will help protect you from loss by offering property and liability coverage. For example, if your property is damaged, your tenant doesn’t pay rent, or your tenant has an accident at the property and tries to sue you, any associated costs will be covered by your insurance.
Different plans offer different levels of protection, so make sure you do your research to find a plan that suits your needs.
As the property owner, you will be expected to cover any maintenance costs that come with the property. This includes keeping up on everyday wear and tear such as leaky taps or a broken water heater. It also includes maintenance to keep your property looking Schmick for prospective tenants. Think new carpets, fresh paint or more substantial renovations that will boost the rental value of your property.
Councils provide a range of services and infrastructure projects to keep the local area neat, tidy and running smoothly. Carrying out these services and projects comes at a cost, which is why all property owners are charged council rates. These rates are generally charged quarterly and differ from council to council.
Body corporate fees
Also known as strata fees, these annual costs are similar to council rates. If you buy a unit, townhouse or duplex in a complex, you will likely be charged body corporate fees. They are used to maintain the property. Body corporate fees vary from year to year, depending on the maintenance required to keep the complex running smoothly.
Unless you plan on managing your property yourself, you will likely have to pay for a property manager. Property managers provide services that make it much easier to rent out your property and ensure your investment is being looked after by responsible, quality tenants. They are well worth the cost, but it’s important you find a manager that you’re comfortable with.
A bit of research will pay off in dividends here. You want to find the right property manager within your budget who offers a level of service that suits your exact needs.
If you’re working with a property manager (see above), these costs will generally be wrapped up in their annual fee. However, if you’re not going through a property manager, you will be faced with advertising your property yourself. This means you will have to foot the bill every time you advertise your property.
Like many costs associated with being a landlord, the amount you pay here will depend on your individual circumstances. You may have to hire an agent, pay for photography and digital advertising. As a rule of thumb, you can expect to pay around 110% of one week’s rent to advertise your property.
If you own a positively geared property — one in which you are making more off your property than you’re putting into it — you’ll probably owe tax on your investment. If you own a negatively geared property, you may actually get a refund on your investment.
The amount of taxes you may have to pay, or the refund you could be entitled to, will depend on the state you live in. It’s important to know what you can and can’t claim, which is why it’s worth working with an accountant that will help you maximise your benefits come tax time.