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“Accounting for every cost associated with owning an investment property can often be overlooked.

Property investment should be a rewarding and meaningful investment that will hopefully go a long way toward securing your financial security. Estimating a realistic budget to meet the cost of property investment will make sure you have a sound-performing investment property, however even a seasoned investor can forget important costs and underestimate how much they will be spending.

When entering into the investment market, it is a good idea to make sure that you are aware of all of the associated costs.

Accounting

Here are a few of the most common costs that get missed:

  1. Accounting fees. Standard accounting fees can increase when you own an investment property.
  2. Strata levies. These levies might be set at a particular rate when you buy into a new development, but can rise steeply just a few years later because the building is no longer covered by warranties. This is particularly the case in new apartment complexes. Properties with facilities like gyms, pools, saunas and landscaped gardens, often have levies rise over time as these bring a large rental property cost.
  3. Pest control. There is often a yearly pest inspection or treatment, particularly in older properties.
  4. Land tax (a state tax). This doesn’t apply to every investor but is worth checking with state laws to see if it applies to you.
  5. Property management. In addition to property management fees, there are often advertising costs and re-letting fees. Ask your property manager about any other hidden costs you may be charged such as inspection fees.
  6. Rental vacancies. Periods of vacancy can be a large rental property cost. It is advisable to plan for the ‘worst case scenario’ as you may experience periods where your property is vacant while you are finding the right tenants. One strategy to budget for this is to keep some funds in an offset account against your mortgage. This will provide you with extra cash that is easily accessible if you need to cover the rent for a certain period of time and has the added benefit of offsetting your mortgage while your property is tenanted.
  7. Rising interest rates. As an investor, you must always be prepared for fluctuations in interest rates and have the ability to accommodate them.

When sourcing an investment property it is vital to ensure that your team are all 100% working for you – not the vendor! Choose a property investment team that deal with many different developers and have a diverse offering of investment opportunities. You want to match your investment solution to specifically meet your needs, goals and objectives whilst also ensuring a maximum return is achieved.”

Written by Toby Dames – CMO – Ignite Alliance