{"id":3054,"date":"2017-09-13T02:57:11","date_gmt":"2017-09-13T02:57:11","guid":{"rendered":"https:\/\/raizinvest.com.au\/investors\/the-costs-to-consider-when-buying-your-first\/"},"modified":"2024-04-04T19:02:15","modified_gmt":"2024-04-04T19:02:15","slug":"the-costs-to-consider-when-buying-your-first","status":"publish","type":"post","link":"https:\/\/raizinvest.com.au\/investors\/blog\/the-costs-to-consider-when-buying-your-first\/","title":{"rendered":"The costs to consider when buying your first property"},"content":{"rendered":"
\"image\"<\/figure>\n

By Michael
\nGilbert, co-founder of Cubbi<\/a><\/i><\/p>\n

Congratulations!<\/p>\n

You\u2019ve
\nscrimped, saved, got the cash in hand and you\u2019re just about to buy your first
\ninvestment property.<\/p>\n

Unfortunately,
\nthe work doesn\u2019t stop here. In fact, it\u2019s only just beginning.<\/p>\n

Whether
\nyou\u2019re going to be renting or living in it yourself, buying an investment
\nproperty always comes with additional expenses that you need to be aware of
\nahead of time.<\/p>\n

The
\nRaiz community is very familiar with the concept of how small amounts can add
\nup over time and the same can be said for the seemingly innocuous extra costs
\nof owning a house (only in a slightly less enjoyable way).<\/p>\n

Here\u2019s
\na breakdown of exactly what some of those expenses are and how you can prepare
\nfor them.<\/p>\n

 <\/p>\n

Stamp
\nduty<\/h3>\n

Scratch
\nthis, if you\u2019re a first home buyer with a purchase under $600,000 in Victoria
\nor New South Wales (conditions apply in NSW) where state governments have
\nditched stamp duty altogether.<\/p>\n

For
\neverybody else, chances are you\u2019re going to pay some stamp duty and this is
\ngenerally the biggest additional cost you\u2019ll have to fork out for. For example,
\nan established home worth $500,000 purchased as a rental property in Queensland
\nwill cost a first-time buyer no less than $15,925 in stamp duty.<\/p>\n

Another
\nkey factor you need to keep in mind is that in some cases lenders won\u2019t allow
\nyou to lump your stamp duty in with your mortgage and you\u2019ll need to ensure you
\nhave that cash upfront. Always speak to your lender in advance about stamp duty
\nto know where you stand.<\/p>\n

 <\/p>\n

Registration
\nand conveyancing fees<\/h3>\n

Registration
\nfees are paid to the Land Titles Office when you submit documentation for
\nprocessing and can range up to $3605 in Victoria for properties over $500,000.<\/p>\n

They
\nare also usually lumped in with your conveyancing fees, the cost of hiring a
\nsolicitor to review all the contracts of sale and ensure the it follows the
\nright legal process. Conveyancing fees are not standardised but are generally
\nclose to $1000, if not more.<\/p>\n

 <\/p>\n

Council
\nrates<\/h3>\n

It\u2019s
\namazing how many people don\u2019t take council rates into consideration. You\u2019re
\ngoing to end up paying at least $1200 per year and it could be more depending
\non where you live.<\/p>\n

Many
\ncouncils also charge late fees so to avoid paying even more than necessary find
\nout what your rates will be and set up a direct debit as soon as you\u2019ve settled
\nso you\u2019re never late.<\/p>\n

 <\/p>\n

Preparing
\nthe property for tenants<\/h3>\n

When
\nyou buy a property there are no clear cut rules that say the seller must have
\nthe property in pristine condition when it\u2019s time to hand over the keys.<\/p>\n

However,
\nwhen renting out your property there are more stringent standards for the
\ncondition it needs to be in and thus you need to factor in the likelihood of
\nhaving to carry out some maintenance tasks such as: mowing, hard rubbish
\nclearing, painting, carpet cleaning and replacing old or broken fittings such
\nas old blinds and shower screens.<\/p>\n

Getting
\nthis stuff done while it\u2019s vacant will help attract better tenants (which in
\nitself can save you money) as well as reducing the cost associated with last
\nminute repairs.<\/p>\n

 <\/p>\n

Vacancies<\/h3>\n

As
\na landlord your first goal is to get some tenants but have you prepared for the
\nfact you might have a month or two without any? As a rule of thumb, you\u2019ll need
\nto budget for about four weeks of vacancy per year.<\/p>\n

In
\nbetween tenants you\u2019ll likely need to spend more money on maintenance and
\nrepairs, such as painting, fixing a wobbly towel rack or extra cleaning costs.
\nThings that just didn\u2019t get done or reported by your tenants.<\/p>\n

Engaging
\na real estate agent might help you find tenants faster but that brings us to
\nour next point\u2026<\/p>\n

 <\/p>\n

Agency
\nfees<\/h3>\n

A
\nlot of people underestimate just how much\u00a0real estate agents cost<\/a>. They can plug you for between 5-10%
\nof the rent, depending on location and other factors. If you\u2019re renting a
\nproperty for $450 a week with an agent charging 7%, that\u2019s $1600 gone a year!<\/p>\n

 <\/p>\n

General
\nmaintenance<\/h3>\n

Things
\nhappen. They aren\u2019t usually anyone\u2019s fault but they happen. A shower starts
\nleaking, a tenant scrapes a piece of furniture against the wall and leaves a
\nmark, a skirting board comes loose.<\/p>\n

These
\nare all perfectly normal things that are inexpensive, in and of themselves, but
\ncan quickly add up. If you\u2019re a landlord then you need to have cash on hand to
\nmake sure maintenance issues get repaired quickly, especially if they involve
\ncritical things like hot water systems or electrical issues – two things that
\ncan throw your budget out really quickly.<\/p>\n

To
\nbe on the safe side, you should set aside 5% of the rent amount in a separate
\nsavings account to make sure you\u2019re covered for maintenance emergencies. You
\ndon\u2019t want to be wacking those on the credit card and racking up 20% interest
\non top!<\/p>\n

Unfortunately,
\nthe supplementary costs of buying a house are – for the most part –
\nunavoidable. The smartest thing you can do is know what they are, when they
\napply and be prepared for them. Hopefully, this brief guide gives you a bit of
\nan idea of what you need to keep in mind before you start raising your hand at
\nauction.<\/p>\n

\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014-<\/b><\/p>\n

Author<\/b>,
\nMichael Gilbert, co-founder of\u00a0Cubbi<\/a><\/p>\n

Cubbi
\nis an online property management platform – for the purpose of cutting out the
\nexpensive (and often underperforming) middleman and replacing him with
\ntechnology. For example, when you accept your tenant, you can create your own
\nlease agreement right then and there online instead of waiting for your agent
\nto get round to it.<\/p>\n

 <\/p>\n

\n

 <\/p>\n

Don\u2019t have the Raiz App?<\/h3>\n

Download it for free in the App store or the Webapp below:<\/p>\n

\n
\"download-raiz-app\"<\/a>
Click to download the Raiz app<\/a><\/figcaption><\/figure>\n

 <\/figure>\n

Important Information<\/strong><\/span><\/em><\/p>\n

The information on this website is general advice only. This means it does not take into account any person\u2019s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.<\/em><\/p>\n

A Product Disclosure Statement for Raiz Invest and\/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.<\/em><\/p>\n

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.<\/em><\/p>\n

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.<\/em><\/p>\n

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By Michael Gilbert, co-founder of Cubbi Congratulations! You\u2019ve scrimped, saved, got the cash in hand and you\u2019re just about to buy your first investment property. Unfortunately, the work doesn\u2019t stop here. In fact, it\u2019s only just beginning. Whether you\u2019re going to be renting or living in it yourself, buying an investment property always comes with […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[],"yst_prominent_words":[]}