What are the ongoing costs for an investment property?

Investing in property can often be a great way to give yourself some financial security and income opportunity. When interest rates are low, taking the leap towards having your own investment property can seem like a smart idea.

While it’s easy to get excited when exploring a new avenue like this, you should take a step back and consider the investment property costs you might come up against. 

Home loan fees

As to be expected, you’ll need to keep up with monthly repayments for your home loan. Along with your monthly repayments, you may need to prepare for mortgage insurance, an establishment fee, and an annual administration fee.  

Property management costs

Managing a property can be a time-consuming task. Handing this responsibility over to a professional property manager can often be a worthwhile move as you can depend on their experience and resources.

Fees can vary from state to state, but you should expect to pay anywhere from 4% up to 12%. Try to shop around and find a property manager you can trust with a fee you can afford. 

Building and landlord insurance

If you’re looking for peace of mind, having building and landlord insurance could help. You never know what misfortune could strike, so it’s good practice to keep your property protected against natural disasters, fires, tenant property damage, and other major events with an appropriate insurance plan. 

Property maintenance, repairs, and renovations

If you already own your own home you probably know just how much maintenance, repairs, and renovations can cost you. Be aware that you might need to spend some money to get your new property up to a decent standard when you first purchase it, and to keep it that way. 

Taxes

Your council tax and land tax costs will depend on where you end up purchasing an investment property. So, if you’re the landlord of the property you’ll be responsible for picking up the bill. 

You’ll also need to do your research before making a purchase as every council across Australia has different rates for taxable services, such as rubbish collection. 

Land tax is set by state and territory governments and is subject to change. The amount of land tax you’ll end up paying on an annual basis is calculated by the combined unimproved value of taxable property. This normally doesn’t apply to your main place of residence and is more likely to affect investors. It’s best to check your state or territory’s revenue office to find out more.

You’ll want to make sure you have a backup plan should you be unable to make your investment loan repayments due to illness, injury, death, or involuntary unemployment. 

Thankfully, loan protection may offer financial security should any major life event stop you from being able to repay your mortgage. At ALI, our Loan Protection Plan is designed to help you by providing a lump sum payment in the instance of serious illness or death, or up to three monthly payments in the instance of accidental injury or involuntary unemployment.

Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.