Understanding the potential initial and ongoing costs of investing in property can help you make more informed decisions about purchasing a property.

Costs can differ for each property purchase so you should always assess your own specific circumstances and seek advice from professional advisers before proceeding with the purchase of an investment property.

Initial costs

Investment planning fees

People who are considering buying an investment property may sometimes see a financial adviser to tailor a property investment strategy. This would be based on their goals and personal circumstances and address any potential risks associated with purchasing an investment property.

Buyer’s agent fees

Buyers who are purchasing an investment property in an unfamiliar area may seek assistance from a buyer’s agent. Their main role is normally to evaluate properties on the buyer’s behalf. They may also be able to negotiate or bid at auction on a buyer’s behalf or even introduce buyers to local property managers. The way Buyer’s Agent fees are charged can vary and could possibly comprise a set agreed amount or a percentage of the value of the property being purchased.

Conveyancing fees

A solicitor or conveyancer is normally engaged by a property buyer to advise on and manage contractual and legal matters associated with buying the property such as in relation to searches of public databases, settlement and land titles matters.

Solicitors and conveyancers charge for their professional services. This could be done by a fixed fee and/or time costed. They will also usually charge the cost of performing searches of various public databases in relation to the property (e.g., title search, council rates, utilities connections, etc).

Building & pest reports

Many property investors choose to hire a licensed building inspector to evaluate the investment property and ensure it’s structurally sound.

Similarly, a pest inspection will provide insight into a potential infestation of termites or other common pests.

The overall cost of generating a building and pest report will depend on the size of the investment property and its location. Any issues identified on this report can be raised with the vendor for negotiation or inform decisions about whether to proceed with the purchase, depending on what contractual rights are available to the buyer.

Stamp duty

Stamp duty is a tax that may be charged by a State or Territory government based on the sale price of a property. To get an estimate on how much stamp duty might be payable on a property purchase, take a look at our home loans government fees calculator or contact the relevant government authority. The duty payable can vary between each State and Territory and can be a large upfront cost so it is important to understand what this cost will be.

Ongoing costs

Loan repayments

For many investment property buyers, loan repayments will be their biggest ongoing cost. Getting the right loan can help put you in a good position as an investor. Take a look at Suncorp Bank’s loans for investors and talk to a Suncorp Bank home loan specialist to learn about what could be right for you.

In addition, if a buyer is borrowing more than 80% of the value of an investment property, they may need to pay for Lenders Mortgage Insurance (LMI). LMI protects the lender if the borrower is unable to make their repayment obligations. LMI is a once only cost at the start of the loan but can sometimes be added onto the amount borrowed under a mortgage and repaid over the loan term.

Insurance

Buyers can usually obtain insurance which covers the investment property building and the potential risks of renting it out. The building insurance component is usually required by lenders as a condition of a loan.

Utilities

Even if a property is tenanted, buyers may be responsible for some utility costs as landlord.

Council rates and land tax

Council rates are generally dependent on the value of the property and vary from council to council. Additionally, land tax may also be payable every year. This is levied by State and Territory governments and is generally based on how much the land is assessed to be worth.

Repairs & maintenance

The owner of an investment property will need to ensure that repairs are performed to maintain it in a liveable condition for tenants. Therefore, there are likely to be costs associated with repairs.

Body corporate/strata fees

If a property is an apartment, townhouse, or on some form of shared land/title, strata/body corporate fees may apply. These fees normally cover services in relation to common spaces in the property, including lobbies, lifts, gardens and more.

Each property will have its own specific strata/body corporate services and fee arrangements which will vary depending on the property and amenities included.

Property manager fees

Some investment property owners hire a property manager to oversee their investment property. The services will depend on the terms of engagement of the property manager but could include finding tenants, managing a relationship with tenants, and solving maintenance issues. The cost of a property manager will depend on the services they provide and which the owner selects.

Renovations

Depending on how much time and money a buyer is willing to put into their investment property, renovations may be a regular ongoing cost. This could be something as simple as re-painting the walls or a more complex project, like re-structuring and re-designing areas of the property.

Make your next property financing move with confidence

Whether you’re choosing to invest in property for the potential to generate passive income or the possibility of long-term capital gains, understanding the costs can help you make more informed decisions – now and in the future.

Talk to a home lending specialist

Published 25 January 2023