Call us on 1300 794 893

Your Money

Unearthing the hidden investment costs of buying property

Buying property can be a lucrative way of investing. In many cases, and with the fluctuations in the share market, property can be a stable means of investing. However, before jumping into the property purchasing pool, it’s important to be aware of all the costs (and ensure you can pay them when they arise).

Under the hammer

When purchasing your investment property, there are a few costs you need to be on the lookout for. While it is tempting to skimp on these, there is nothing more taxing than a dud property. Pay a little today and save a lot tomorrow.  

Solicitor fees

Your solicitor or conveyancer can take care of the legal work involved in the purchase. Keep a good one in your Rolodex to cross the t’s and dot the i’s for you.  

Pest / building inspections

The savvy investor will ensure the necessary inspections are carried out to unearth any problems with a property, including bug infestations or unstable structural issues. Make sure you do this before signing on the dotted line.

Building insurance

In obtaining a loan for your property, the lender may impose an insurance condition, to protect the borrower and lender in case of any damage to the property (such as a fire or flooding). However, if you buy property under a strata agreement, the body corporate may have a policy for the entire lot. In this instance, the lender will require evidence of this policy.

Getting the cash

Lenders Mortgage insurance (LMI)

This insurance covers the lender should you default on your loan. In most cases, LMI is applicable to those who borrow more than 80 per cent of the total value of the property. 

Loan application fee

Depending on your lender, to process the application for a loan, an application fee may apply. The cost of this is dependent on the details of your loan and the policies of the lender.

Red tape costs

Purchase stamp duty

This is a state government tax and the cost is based on how much the buyer paid for the property. If you are a first homebuyer, you may be able to rebate some of the cost of the stamp duty.  

Property transfer fee

This is the tax charged for transferring the title of a property from one owner to the next, regardless of how the property is financed. The fee charged varies depending on the state or territory, but can be charged on either a set fee basis or a sliding scale.  

Mortgage stamp duty

If you fund the purchase using a mortgage loan, stamp duty on the amount of the loan may be required. However, as it is a state government tax, it pays to check what the state/territory regulations are – the amount payable changes from state to state.  

Mortgage registration fee

This fee is payable to the Land Titles Office in your state or territory and refers to the registration of the mortgage onto the property. This can cost between $85 to $125 for a one-off registration but varies between states and territories. 

Investing in real estate is an exciting way to amp up your investment portfolio. However, before entering into any agreements, it pays to do the research and know all the costs of buying property.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Related articles

Tips for buying off the plan

The highs and lows of owning property

What'€™s the real cost of a dream home?

Is the Gold Coast a golden opportunity?

Smart property plays for 2012

Published on: Monday, January 10, 2011

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300