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Buying an investment property

February 17, 2022

Buying an investment property is a popular form of investment but you need to be aware of the financial implications.

You'll need to consider:

  • rental income
  • depreciation
  • land tax and capital gains tax
  • landlord and building insurance
  • the type and location of the property
  • the transaction costs of the purchase
  • whether the investment will be negatively or positively geared
  • whether you'll self-manage the property or engage an agent
  • ongoing repair costs.

Calculate how much you can borrow, including all expenses of a home loan, such as:

  • interest rates
  • stamp duty
  • account keeping fees
  • insurance
  • pre-purchase inspections
  • legal, application, value and settlement fees.

You will also need to answer questions like:

  • Do you have a deposit saved? The usual amount is 20 per cent of the purchase price, but the more you can save the better.
  • Will you have to pay mortgage insurance?
  • Have you accounted for all transaction costs (legal, inspections, government charges, financial costs, moving costs)? Up to 5 per cent of the purchase price can be added in just these costs.
  • Do you want to buy an existing property or build your own?