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7 costs to consider when building a property portfolio

Updated: May 26

When buying a rental property there are several costs to consider. You must understand your numbers to determine your income and what expenses are going out. In this article we'll share our top seven costs to consider when real estate investing.


As real estate investors, ourselves, we want to set our clients up for success. To do so we spend a lot of time analysing their finances and data from a cash flow perspective. We also look at the expected tax benefits that the investment property can produce for them. This then allows us to determine the projected growth from the property over a period of time. A few of the costs that we forecast for our clients are listed below:


Interest rates/ mortgage


When purchasing a rental property, you should think about your mortgage. It's incredibly important to structure your lending correctly by consulting with a mortgage broker who can ensure that you're getting the most suitable interest rate for your circumstances.


Council rates


As a property owner (whether you live in it or not) you're required to pay council rates. These are the rates that local councils charge to raise revenue so they can provide their community with services and infrastructure. Council rates will cover waste management, local roads and suburban care. To understand how much you are required to pay in council rates, go to your local government's website.


Water rates


When buying a rental property you'll be required to pay water rates. There are generally two charges that you will be responsible for. They're fixed charges and water consumption charges. Refer to the graph below to understand how these payments work.


Repair and maintenance costs to your investment property


When purchasing an investment property you need to be aware of repairs and maintenance costs that it could incur. If you're a real estate investor, it's your responsibility to ensure that your property is liveable for tenants and to pay for breakages (if it isn't covered by insurance). It's always a good idea to have some money set aside so that you can cover maintenance costs.


Vacancy


At REIF, we like to advise real estate investors that they should have some money set aside for rare instances when their property is vacant. While rare, especially at the moment with record-low vacancy rates, there may be times where nobody is occupying your property. Furthermore, you may not be receiving a source of income from that property. Just like with your repairs costs, you should have sufficient savings aside for the rare case where your property is not being occupied.


Insurance


If you own an investment property it's advised that you have home and landlord insurance. This is designed to protect real estate investors against any risks that can occur when renting your property out. Insurance premiums are different depending on where in Australia your property is located.


Costs to consider when growing your investment property portfolio

Property management


If you aren't managing the day-to-day running of your rental property yourself, you're most likely leaving it to a property manager. A good property manager will ensure that the right tenant is occupying your property and paying their bills on time. If you're paying someone to manage your rental property, you'll need to allocate a small percentage of your weekly rental income to them.


Learn more about buying an investment property...


REIF will hold your hand right from the beginning to end of your investing journey to make the process as seamless as possible. To learn more about what opportunities are available for investors please reach out on the details listed below.


Ph: 1300 130 932

Email: clientservices@reif.com.au

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