Buying an investment property can be a great way to build financial prosperity, however it is very important to factor all the additional costs into the investment proposal. From the initial marketing and Letting, to the ongoing Property Management and Maintenance, we have identified 5 key areas that investors fail to adequately budget for when buying an Investment Property:
- Conveyancing Charges: As soon as you have purchased a property, you are going to need a legal mind to transfer the title from the vendor to you the purchaser. Typically, charges for conveyancing works will be around the $1000 mark however it is really important to select a company that has a great reputation and experience in disputes and resolution. Good conveyancers or property Lawyers are worth their weight in gold in situations where things go bad! Time and time again we see purchasers lose out financially as a result of poor representation. The most common disputes that arise are from ambiguous contract clauses and fixtures and chattel disputes.
- Property Management and Letting Fees: If you are planning on using an agent or Property Manager to look after your investment, you will need to be very much across the ongoing fees that are charged by different Property Management companies. Fees vary widely from company to company, however the average management fee in Victoria (according to the Real Estate institute of Victoria) is approximately 6.3% of the monthly rents collected – Consumer Affairs Victoria has some very helpful information when it comes to this process. Other common fees charged by a Property Management company are initial letting fees (typically one and a half weeks rent) as well as advertising and administration fees. Some agencies even charge monthly statement fees! These costs all add up so be vary aware of any hidden charges.
- Preparing your property for a Tenancy: So you have managed to secure your dream investment property and now you need to prepare the home for your new tenant. This can be quite an expensive exercise and its important to understand what improvements add value, versus those that are a waste of money. Painting and thoroughly cleaning the property will ensure that you will entice potential tenants at open for inspections. Making sure that all appliances and fittings are in working order is also a very important thing to keep in mind. Your Property Manager will be able to advise you on any items in the property that may need attention prior to a new tenancy starting. Getting on top of these things prior to a new tenancy can eliminate any potential teething issues for your new tenant (ie making sure all globes in the property work, hinges on kitchen cupboard etc.).
- Ongoing Maintenance: Depending on whether you have purchased a brand new property or one that has been around for 100 years, throughout the course of the tenancy there is no doubt that there will be a maintenance request at some stage or another. Maintenance requests are a fundamental part of Property Management and can be classified as either urgent or non urgent under the relevant legislation. It is important to remember that you will be liable as the landlord to have these issues fixed at your cost. Costs for repairs may range anywhere from a few hundred dollars to a few thousand dollars, so again, it is really important to make sure that you have adequate funds as a safety net to service these costs if or when they may arise.
- Payment of Rates and Outgoings: When buying an investment property, make sure you look carefully at the council rates, water rates and Body Corporate fees within the Contract of Sale and Section 32 statement. These outgoings are to be paid by the owners and can often put financial pressure on investors if they have not been budgeted for correctly. We often see instances of Body Corporate fees rising year on year, so again, factor this in to your budget. Full scope Property Management companies will be able to pay all outgoings on your behalf from the collection of the monthly rent.
As a Melbourne Property Management company, we are able to provide assistance and guidance for every step of your investment journey.