| Stamp duty
Your local Stamp Duties office can provide you with information on how much stamp duty you have to pay, how it is calculated and if you are entitled to a discount or to defer payment. The stamp duty is payable depending on the the price of the property you are buying.
Lenders' Mortgage Insurance
This cost generally applies if you borrow more than 80% of the value of the property you are purchasing. It covers the lender if there is a shortfall after the lender exercises its right to sell the mortgaged property due to a borrower not complying with the loan agreement and mortgage.
It does not protect you from having to pay what you owe on a mortgage. It does not pay out the loan in the event of the borrower's death or injury, nor cover loan repayments in the case of illness or unemployment. Remember, if you can contribute to more than 20% to the purchase price of the property, Lenders' Mortgage Insurance may not be required.
Legal costs
Many of the costs associated with buying a property are non-negotiable. Your main legal cost will be for conveyancing, which is the transfer of property from one person to another.
Searches and inspections
You should not exchange contracts to purchase a property until you have had all the necessary searches and inspections done, either during the "cooling off" period or prior should you elect to waive your right to the “cooling off” period. You should be advised by your buyer’s agent, solicitor or conveyancer to what searches and inspections need to be carried out.
Depreciation schedule
Applicable only if it is an investment property. Your accountant will explain its full value and the its tax consequence.
Buyers Agent
In addition to the achievable savings in the purchase price and the on-flow savings to stamp duty and others, this cost could be tax deductible in the case of an investment property. Best you consult your accountant.
In general terms and as a guideline only, the total acquisition cost (excluding stamp duty and interest on the loan) to buy a property ranges from 2% to 5% of the purchase price.
The on-going costs of owning property
Rates
From the settlement date, you are responsible for all council & water rates, levies & insurance on a property. There might be variances if it is an investment property.
Generally, the tenant of your investment property would be paying the water “usage” cost. Check your State’s regulations.
Building insurance
It's important to remember that at the latest, you must have the building insured at the time of settlement. However, it's best to insure the property as soon as you exchange contracts. This insurance cover will not be required if it is a strata property. Refer to “body corporate fees” below.
For an investment property, it is strongly advisable to obtain an annual landlord insurance cover. The benefits of this cover are substantial which will be explained by your insurance broker.
Body corporate fees
When purchasing into a property that may have one or more owners such as strata title units, you need to make allowances for a range of additional costs involved with the maintenance and insurance of the property. These include body corporate fees, contribution to sinking funds and building (not content) insurance.
Maintenance
These vary according to your decisions.
Management fees
For an investment property, you may select to manage the rental property yourself or appoint a qualified property manager. In case of the latter, this cost generally ranges from 6% to 9% of the rental income.
Fred Haggar is founder and principal of Property Search 4U, a buyers agency that has won for the second year in a row, the "highly recommended" award in the 2008 Australian Achiever Awards for NSW's Real Estate Services category. Property Search 4U is an active member of the Real Estate Institute of NSW (Sydney based), the International Real Estate Federation (Paris based) and the Business Enterprise Centre (Sydney based). |
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