Whenever you buy a property for the purpose of taking advantage of capital growth, it's going to be a process that comes with an assortment of expenses. You'll want to be prepared for the various costs you're going to have to cover and know how to get the most out of your investment.
First of all are the costs directly related to the purchase of the property. That means paying stamp duty on top of the property value, which depends on both the price of the home and on which state you're in. Note that you can reduce stamp duty on house and land packages - depending on if the land falls within your particular state's guidelines, you could end up paying it on the land and not the house. You may also have to pay for the services of a solicitor or conveyor, who will oversee the settlement process and ensure it goes smoothly.
If you require investment finance, which you almost certainly will, you'll also need to pay for the various costs involved in a loan application and have a deposit of at least 10 per cent of the value, whether through savings or home equity. Depending on how much of the value you're borrowing, you may also need to pay for lenders mortgage insurance.
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You yourself will have to take out cover for the property, too. You might choose to take out Landlords Insurance if you're planning to rent the property out, which can protect your property from any damage, whether willful or accidental. If you're constructing a new home, you'll need building insurance, too.
Finally, don't forget the cost of building inspections and, for existing properties, pest inspections, which will give you peace of mind but can run into hundreds of dollars each. You'll also need to factor in any moving costs for furniture, plus council rates.
Minimising your tax and maximising your returns
With so many expenses, to take care of, it's a wise idea to do all you can to maximise your profit. This can involve a number of tax-reducing strategies:
Claim as many tax deductions as you can on the costs involved in running the property, from advertising for tenants to driving over to inspect the home.
Have a professional quantity surveyor carry out a depreciation schedule, so you can claim the depreciation of your investment property and its contents come tax time.
Consider structural factors like whose name the property is under. If your partner is not earning money, for example, they can't reduce their tax - so it's worth putting it mostly in your name.
Complete a tax variation form so you can receive tax off-sets with every pay cheque
Remember to speak to professional property experts like DPN to make sure you've got your bases covered. In some cases, we can access occupation specific benefits which may avoid the need for mortgage insurance.