When buying an
investment property, you need to know that there are more costs then just your mortgage
repayments
When owning an
investment property, there will be ongoing expenses that you can’t pass on to
your tenant. You should certainly consider before you purchase a property.
These expenses add
up and may affect your ability to pay your mortgage, so it is important you
know what those expenses are before you buy an investment property.
It is a good idea
to set some money aside for those expenses to avoid any nasty surprises.
RATES
Rates can be
extremely expensive, depending on what part of the country you live in.
Generally, they are
based on land values, which is why council rates in high end suburbs are
higher.
They are designed
to cover the cost of delivering essential services to your area,
things like bin collection, road maintenance, local public works and so on.
So, really, they
are a necessary evil.
WATER RATES
Water rates are different.
It varies from state to state, but generally the landlord can pass on the water
usage to the tenant, as long as the property is individually metered.
The rest of the
water rates bill has to be paid be the owner
MAINTENANCE
Few investors are
prepared for the upkeep of an investment property.
Apartments
generally require less maintenance, while older homes need a bit of TLC over
time.
The older the home,
the more potential problems it will face, the plumbing or electrical may have
problems.
It is a good idea
to set aside some money each week to help cover these costs.
You will soon know
if you are putting enough away!
Even if your
property is not that old, things do break and it will need simple repairs.
If the hot water is
not working, for example, with a tenant in the property you will need to get
this fixed immediately.
BODY CORPORATE FEES
This is one area
where homes really do have the upper hand over apartments.
Buying an apartment
is usually cheaper than a house, but the body corporate fees can easily reduce
that advantage very quickly.
These fees are to
pay for the costs of maintaining the common property, facilities and gardens,
as well as paying for compulsory common property insurance.
The smaller the
apartment block the cheaper the body corporate rates will be as will have less
common areas.
It may be a good
idea to avoid buying in large complexes for a multitude of reasons, one of
which is the high body corporate costs you will have to pay to maintain the
pool, the elevators, the gym and so on.
These places are
great for renters, not so great for owners’ back pocket.
INSURANCE
Insurance is vital
for managing an investment property, but of course it is an additional expense.
You may need to consider house as well as contents insurance if the property is
furnished
When you rent out a
property then you need to consider landlords’ insurance to help protect against
damage and unpaid rent.
HELP
You will need help
from time to time, but there is no need to employ a full time property manager
that will cost you anywhere from 7-15% with hidden costs.
No one will care
more then you when it comes to looking after your property!
There is another
way, and that is to use online property management software like RealRenta. The platform will collect and track the rent
on your behalf, doing all your invoices and receipts, sends out rent reminders
and breach notices when rent is not paid (by email and text – SMS) all automatically.
You can check
the tenant on bad tenant database, you can get a professional to check the
tenant’s references, you can advertise your property for rent on multiple sites
and tenants apply online, whereby the owner can manage these tenant
applications to find the best tenant.
All emails
and text messages to your tenant are logged to stop the he said she said and to
have a buffer between you and your tenant
RealRenta is a one stop shop for everything you need to manage your rental
property. Tenants can even put in maintenance requests and owners can then
manage the requests. RealRenta even has a partner’s page where you can find discounts on other
services you may need.
DON’T BE PUT OFF
Once you have an
idea of your costs you can build those into your budget to determine how much
rent you will need to charge.
At least the money
will be going into an appreciating asset rather than paying off someone else’s
mortgage, as is the case with renting!
Jason Gwerder
Friday, 2 September 2016
