Three unexpected costs of buying an investment property
Over 98 per cent of those who sold their Melbourne properties in the first three months of this year made a profit. That fact, from CoreLogic's most recent Pain and Gain report, proves that property investment in Melbourne can still be still a lucrative game.
Despite that, investing certainly isn't without its pitfalls. To make sure you don't fall into any, check out our quick list of often forgotten property investment costs that could catch you out if you're not prepared.
1. Quantity surveyor fees
Calculating the depreciation of your Melbourne investment property, and the items within it, allows you to claim that amount in your tax return. That could mean tax savings of hundreds or even thousands every year.
However, if you're a first time investor, you may need to have a depreciation schedule prepared by a quantity surveyor. Onproperty estimates that this will set you back between $450 and $1000, but it could save you far more, and you'll usually only need to do it once. This cost should include a consultation with the surveyor, all relevant research, a full inspection and a copy of the final depreciation schedule to give to your accountant.
If you're a first time investor you may need to have a depreciation schedule done by a quantity surveyor.
2. Conveyancing costs
When you're budgeting for your investment property purchase, conveyancer fees are an easy cost to forget. Unfortunately, this is also an essential cost, as a conveyancer is necessary during most property sales to check contracts and ensure title is legally passed (among other things).
The Australian Institute of Conveyancers estimates this will set you back between $900 and $2,000 per transaction, depending on the complexity of the purchase.
3. Landlord's insurance
Budding property investors should always operate with the utmost caution, as there's a lot of money at stake. The best way to cover your back is to purchase a comprehensive landlord and building insurance policy.
This will cover acts of nature such as fire or flooding, damage to the building's structure or contents, as well as rent default or tenant related damage. That includes remuneration for loss of income due to everything from unexpected death of your tenant, to tenant eviction due to a court order and non-payment of rent. Canstar estimates that such a policy costs on average $928 in Melbourne.
To make sure you make money instead of losing it, get in touch with Werribee's most trusted mortgage brokers here at Direct Mortgages. We know investment property in Western Melbourne better than most, and would love to help you with every step, from finance to strategy and beyond.