Purchasing property is often seen as a smart investment, but it can actually be a pretty financially challenging process. While the initial costs of buying a property such as the purchase price, loan application fee, and government fees are well-known, there are many hidden costs that can catch buyers off guard.
This is why it’s essential to engage an expert in the field, such as a buyer’s advocate or investment property agent like Monopoly Wealth, to help you navigate the complexities of purchasing a property. In this article, we’ll explore the hidden costs of purchasing investment property in Australia that buyers need to be aware of before they take the plunge into property ownership.
Stamp Duty and Other Government Fees
One of the most significant hidden costs of purchasing an investment property in Australia is government fees. Every state and territory levy a stamp duty on the sale of property, and the amount varies depending on the purchase price. Stamp duty rates can be high, so it’s essential to include this expense in your budget when you’re calculating the total cost of your purchase.
Additionally, other fees such as mortgage registration and transfer fees may also apply, and the rates vary from state to state.
Using a buyer’s agent such as Monopoly Wealth can help you navigate the complexities of these government fees and ensure that you are aware of all the hidden costs you need to consider.
Legal and Conveyancing Fees
Engaging a real estate conveyancer or solicitor is an essential part of the buying process. These professionals specialise in conveyancing and will prepare the necessary documentation and conduct the settlement process on your behalf. The costs of legal representation will vary depending on the complexity of the property purchase and the person you use.
Inspection and Building Reports
Building, pest and strata inspection reports can reveal defects that might not be immediately visible during a property inspection. These reports can alert you to major structural problems or issues such as asbestos, termites, electrical, ventilation or plumbing faults.
If you purchase a townhouse or apartment, a strata report can also indicate to you whether the property is adequately run and maintained.
Lender’s Mortgage Insurance
One of the most significant hidden costs of buying property in Australia may be the lender’s mortgage insurance (LMI). If you don’t have a large enough deposit, LMI can become a significant expense.
LMI is meant to protect the lender from borrowers who can’t repay the loan. If you have a deposit equal to or more than 20% of a property’s purchase price, you will generally not be asked to pay this insurance. Under this amount, though, you’ll generally have to pay LMI, but this can be capitalised on top of your loan so you don’t necessarily have to pay for it upfront.
Interest Charges
The long term interest charges on your home loan will be the most significant expense you face over the life of your loan. It’s worth considering different lenders’ offers and comparing the comparison rate. You can choose a fixed or variable interest rate, or a combination of the two, based on your needs and circumstances.
Moving Costs
After settlement, you will need to move into the property, which can come with additional costs. These may include hiring movers, renting a van, or purchasing packing materials.
Ongoing Costs of Investment Property (Australia) Ownership
In addition to the upfront costs associated with purchasing a property, there are also ongoing expenses that you must budget for if you plan to own a property in Australia. These include strata fees for communally managed properties, council rates, utility costs, building, contents, or landlord insurance, and any necessary home improvements or renovations.
Property management fees and maintenance fees for leasing out your property also need to be taken into consideration, depending on the type of property you have purchased.
Final Thoughts on the Hidden Costs of Investment Property Australia
Buying a property in Australia can be a complex and time-consuming process. It requires a lot of due diligence, planning and budgeting to ensure that you make an informed decision and avoid any unforeseen expenses. This could be made easy with a buyer’s agent.
Working with a buyer’s agent or investment property agent such as Monopoly Wealth can help home buyers to navigate the complexities of purchasing a property while providing you with expert guidance on the hidden costs involved. So, if you are planning on buying an investment property (Australia), consider working with a buyer’s agent to help you make the best decision for your needs.
To learn more about how Monopoly Wealth can help you with your investment property needs by contacting us today.
