There are a few fees and costs that you may need to budget for when buying an investment property:
- Lender costs cover the administration fees including the lender’s own valuation. These costs will typically cost between $600 and $900.
- Legal and conveyancing fees usually cost between $1,000 and $1,500.
- Mortgage insurance costs. Lenders mortgage insurance is applied to loans where the borrower has a deposit less than 20% of the purchase price.
- Building inspection and report is to be carried out by an expert before you purchase the property. The Contract of Sale should take into consideration the building inspection, giving you the option to withdraw the offer without any significant penalties. The cost of a building inspection and report varies, depending on the size of your property.
- Pest inspection. This report should be completed before you purchase your property to ensure the building you are purchasing is free from pests. The Contract of Sale should take into account the pest inspection, giving you the opportunity to withdraw if pests are found to be a problem with your property, without incurring any additional costs. A pest inspection will typically cost around $500, depending on the size of the property.
- Stamp duty. Stamp duty rates depend on the property’s value and are set by each state and territory. Concessions are not usually available for purchases of investment properties and stamp duty is considerably higher. There may also be a stamp duty on the mortgage.
- Rates. Rates are a form of property tax that are normally issued quarterly by the local government body or council where the property is situated. The amount of rates payable is at the council’s discretion.
- Body corporate. Units, townhouses and duplexes may be charged body corporate levies to cover insurance, and expenses for the upkeep of common areas. These levies are usually issued quarterly and can vary in price due to a range of factors, like the size of your property and the amount of common areas that require regular maintenance.
- Landlord insurance. If you’re investing, landlord insurance is a safety net that covers rental properties for damages or destruction.
After applying for your home loan, it’s a good idea to start looking at home and contents insurance. Some lenders require a minimum sum insurance policy, which will cover the building should anything go wrong. Once you sign a Contract of Sale, consult your legal representative to see if you need insurance cover immediately, as well as the minimum sum to cover the rebuilding costs.
Once you have settled into your new home, you will need to budget for council and water costs, along with your regular home loan repayments. If you are buying a unit or townhouse, you will need to factor in body corporate levies on top of all these fees and costs.