Donâ€™t forget start-up costs
Stamp duty should always be factored in when determining how much to spend on an investment property.
It varies from state to state but can range from one per cent to six per cent depending on the purchase price. It’s wise to factor this cost into the equation when determining how much you can borrow.
Legal or conveyancing fees are further start-up costs you need to factor in and the good news is they are often tax deductible if the property’s solely for investment purposes.
Ongoing costs: Seek professional financial advice on what you can and cannot claim on your investment property. Not doing this could cost you thousands of dollars each year versus saving thousands.
Insurance: You will need both building and contents’ insurance including carpets, window furnishings and fittings. Some insurance companies also offer cover against loss of rental income.
Rates: Investment property owners still need to pay their rates, this isn’t something a tenant pays.
Repairs: Only items needing to be fixed are tax deductible – not property improvements.
Improvements: Renovating a bathroom, for example, is an improvement which will increase your property’s value and is therefore seen as being capital expenditure so it’s not a full tax deduction.
Body corporate: These ongoing quarterly fees apply to units, complexes and some townhouses for residential and commercial property to cover the maintenance costs of lifts, landscaped grounds, a pool and other lifestyle and recreational common areas.
Always speak with your accountant to ensure you are aware of all the costs involved and what you can and can’t claim on your annual tax return.