Look Out for Hidden Property Costs
If you want to be a property investor, you must look out for hidden costs. First, you must be aware of all the costs that you must pay aside from the property purchase price. Most properties are tagged with stamp duty fees as well as title fees, registration fees, and mortgages to get funds for the house.
Of course, you will not buy the first house that you see. Since a lot of money is involved in the purchase, you would want to have it inspected first. Thus, you must pay inspection fees and if you have an architect inspect the design of the house and you can also have pest inspections or valuations which all costs money.
To protect your property against incidents that can cause damage or destruction, it is important that you take out insurance and make sure that your coverage is enough. Property insurance can include home and contents insurance, public liability insurance, contents insurance and building insurance. For those who have rental properties, they must have landlord insurance to cover them against tenant injuries.
If you purchased a property that has multiple owners, you might be asked to pay for owners’ corporation or strata fees monthly or yearly. These are charged to cover maintenance costs, security costs and for other expenses needed for property. The strata fee may also include the costs of amenities such as gyms, swimming pools, basketball courts and other recreational areas.
You must also have a contingency fund for all the repair or renovation projects that you may have to pay eventually due to wear and tear. For rental property owners, there might be times that the property does not have a tenant. Thus, they must have a contingency fund of at least a month’s worth of rental fees to pay other expenses such as mortgage, insurance and mortgage fees.
If you are a rental property owner, it is important to note that rental income declines in the long run due to strong capital growth. To avoid this from happening, you can divide your rental income with the property purchase price to get the same income annually. If you do not have the time to overlook your property, you can hire a property manager for a cost.
Finally, you must also have funds for your land tax. Though land tax is not charged in your main residence, you will have to pay this if you have investment properties. If you have many properties, never forget to pay your land tax to avoid charges on tax evasion.
