The ongoing costs of owning real estate
When you decide to buy a property whether it is for you to live in or as an investment, you need to remember that there are more costs involved than just the initial deposit and solicitors fees.
Owning any real estate is a substantial financial commitment, so you need to know exactly what those costs are going to be so you can prepare for them. Most people often overlook some of the extra costs that are associated with owning property, and this can affect your overall return.
The below lists some of the costs that go with owning real estate and I hope this helps you with your purchasing decision.
The Mortgage Payments
Finding the loan that suits you best, is one way to make sure that one you won’t be paying high fees. Many mortgages have costs hidden inside them, so don’t just go for the cheapest interest rate. Make sure you shop around and get all the included fees explained and pointed out to you. Also, you can always negotiate the deal the bank offers you, as in many cases, they will remove some of the fees.
Government fees and charges
Once you buy your property there are government charges to pay, stamp duty is once off payment when you buy your property, and the amount that is charged is different in each state. It is always best to check these prices out before you purchase, so you know how much you will have to pay.
Then there are the local council charges of rates and water; they may be in separate bills as well. Make sure you have factored in both of these costs, in some areas they can be high. Keep this in mind; also they may have different fees depending on if you are living in the property or if you use the property as an investment.
Somehow a property seems to know when it has a new owner, it is just one of those things that happen and something major will break down after you take possession of the property. Keep at least a couple of months expenses in the bank so you can afford to repair these items. You may also want to upgrade some of the fixtures when you own the property. Always have more than you budgeted for as they rarely ever cost less than you are expecting them.
Make sure you always have insurance on your property, if you have it as an investment get the best cover to make sure that any loss of returns and tenant damage is covered. It makes it a lot easier when you know that you are covered for any incidents that may happen.
If you are buying an apartment or into a complex that has a body corporate, make sure you do your research into the fees. The amount you have to pay may increase over time, and if you are on a fixed income, then this may affect what you can afford later on. Most body corporates also have a discount on the fees if you pay before the due date, this can help with keeping your expenses down.
Pools, gardens and the property
If you are buying a freestanding home, then you will have to look after these yourself, and if you are renting out the property, I suggest maintaining these items yourself. If you leave it up to the tenant, they may not look after it very well, and when they leave, you may find that things are broken and that the repair costs exceed the bond held on the property. I find it is best to add-on a little bit more to the weekly rent and look after these items yourself.
If you don’t watch your electricity, gas and sometimes hot water, these bills can add up dramatically. This may leave you short when they come due, so make sure you see a copy of the old owner’s bills before settlement. This way you know what the costs are and based on your usage you can budget for them.
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Until next time as always, do your research before putting pen to paper.
Happy investing and have fun.
Thank you for taking the time to read this post, I would love to hear about your experiences with the ongoing costs of owning property and any lessons and tricks that you have learnt.