- 7 Jul, 2017

The Costs Involved in Property Investment

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Property investment can create excellent financial returns. However, before you take the plunge, you need to consider upfront costs. Then, you can determine if property investment is for you.

First Home Owners Grant

The First Home Owners Grant is available for investors. But, this must be your first home. Plus, you have to reside in it for 12-months to get the grant. At present, the grant is between $7,000 and $15,000, depending on the state of application lodgement. Although, this frequently changes with government budgets and elections.

Who is eligible for the grant?

  • An Australian citizen or New Zealand permanent resident.
  • A first home buyer who has not previously owned
  • Buyers of a new or extensively renovated home.
  • Applicants 18-years or older.
  • Purchasers of property under a specified amount.

Stamp Duty

Stamp duty is a government cost that differs from state-to-state. Though, in most cases, it is dependent on the purchase price of the property.

How does stamp duty affect me?

  • Adds thousands to the purchase price of a home.
  • Can be an unexpected cost.
  • Calculated as a percentage of the total purchase price of an established
  • Only land attracts stamp duty when building.

The Deposit

If you don’t have home equity, then save a deposit before buying. Sure, you can borrow more than 80% of a property’s value, but you’ll have to pay Mortgage Lenders Insurance (LMI). This insurance can add tens of thousands to the cost of property.

How does LMI protect?

  • LMI is lender insurance that protects the lender against loss.
  • Should you default on loan repayment, LMI pays the lender.
  • As a borrower, LMI is of no benefit to you.

Land Tax

Your primary place of residence is exempt from land tax. Nonetheless, an investment property may attract a fee. Once again, this tax varies depending on the state.

What are the terms of land tax?

  • Land to a certain value is exempt from land
  • After you reach the threshold, you’ll have to pay an annual fee.
  • Tax is only payable on the land value, not the home.

Council Rates

Local council taxes apply to property you purchase. These fees vary depending on the council and estimated value of the home.

What does this cost cover?

  • Road and footpath maintenance.
  • Rubbish collection – though some councils charge extra.
  • Sewerage and light maintenance.
  • Infrastructure and services.

Corporate Body Fees

Should you purchase a townhouse, unit or apartment, this will attract a corporate body fee. This fee covers the cost to maintain and insure the grounds and buildings.

How much are corporate body fees?

  • Fees vary depending on the size of the complex.
  • The more facilities – tennis court, pool and gym – the higher the fees.

Utility Costs

When you first buy property, you’ll need to ensure the installation of all utilities. These include water, electricity and gas. Your tenant handles the connection and usage cost to all utilities, except water. As such, you’ll pay a sewerage fee.

What utility costs apply?

  • Initial water connection and ongoing sewerage fees.
  • Gas and electricity installation.

Emergency Services Levy

Any property owned attracts an emergency services levy. Such a fee pays for the metropolitan and country fire service, state emergency services and marine rescue.

How is the fee calculated?

  • Investment property value based on your council rate notice.
  • On your property’s location – regional or city code.
  • A fixed Council fee amount.

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