Posted on: June 13, 2025
What It Really Costs to Be an Aussie Property Investor
One in five taxpayers in Australia is a landlord, with about 2.25 million individuals owning investment properties across the country. Together, they hold roughly 3.25 million properties, making property investment a significant part of the national financial landscape. Whether you’re new to property investment or have been managing rentals for years, understanding the establishment and ongoing costs is crucial.
One-Off and Upfront Costs to Remember
These are initial costs when purchasing an investment property:
- Stamp duty: A significant upfront cost that varies by state and property value. For instance, in Victoria, stamp duty on a $500,000 property is approximately $21,970.
- Conveyancing and legal fees: These services ensure the legal transfer of property ownership, typically costing between $500 and $2,200, depending on the complexity.
- Lender’s Mortgage Insurance (LMI): If your deposit is less than 20%, you may need to pay LMI, which protects the lender in case of default.
- Pest and building inspections: Essential for identifying potential issues before purchase, these inspections can save you from costly repairs later.
- Mortgage registration and loan setup fees: State governments charge fees to register your mortgage, and lenders may have their own setup fees.
- Buyer’s agent fees: If you use a buyer’s agent, expect to pay either a fixed fee or a percentage of the property’s purchase price, typically ranging from 1.5% to 2.5%.
Ensure you check what’s applicable in the state or territory in which you’re purchasing a property, as the imposts will differ. PWC has issued a map of Australian stamp duty and land taxes. And, The Australian Financial Review reported earlier this year that Victoria has higher levies on property investors than elsewhere in the country.
Monthly Expenses That Impact Your Rental Income
Owning an investment property involves several recurring costs.
Consider:
- Mortgage repayments: Interest-only loans offer lower initial payments but don’t reduce the principal, while principal and interest loans have higher repayments that decrease your debt over time.
- Property management and leasing fees: Engaging a property manager typically costs between 5% and 8% of your weekly rental income. This fee covers services like tenant selection, rent collection, and property maintenance coordination.
- Council rates and land tax: These vary by location. For example, in Victoria, land tax applies to properties valued over $50,000, with rates increasing based on the property’s value.
- Water and utility costs: While tenants usually pay for their own electricity and gas, landlords may be responsible for water supply charges and any utilities not separately metered.
- Strata/body corporate fees: If your property is part of a strata scheme, you’ll pay regular fees for building maintenance, insurance, and shared facilities. These fees can vary significantly and may increase over time.
- Advertising and administrative costs: When a tenant vacates, expect to pay for advertising the property and conducting background checks on prospective tenants.
- Vacancy periods: Budget for up to four weeks of vacancy each year, during which you’ll need to cover expenses without rental income.
- Repairs and maintenance: Setting aside funds for ongoing maintenance helps address issues promptly to maintain your property.
- Renovations or upgrades: Periodic updates to the property can enhance its value and appeal but call for extra investment.
Why Insurance is Essential
Insurance is another key recurring cost to consider. Landlord insurance is crucial for protecting your investment. It can cover unexpected events like tenant default, property damage, and legal costs. For strata properties, building insurance is often included in the strata fees, but be sure to verify the coverage. Extra options such as rent default and legal liability coverage can offer further peace of mind.
Managing Cash Flow and Tax Effectively
Maintaining a healthy cash flow paves the way for investment success. Consider using a detailed spreadsheet or an online cash flow calculator to track income and expenses. If you use a property manager, they may opt you into an online management portal, but it would only show the expenses you asked them to pay from the rent collected.
As well, building an emergency fund equivalent to 5% to 10% of your annual rental income can help cover unexpected costs.
Other expenses, such as interest on loans, repairs, management fees, insurance, and advertising, may be tax deductible. Check this with your property-savvy tax advisor or accountant to identify deductible expenses and understand tax implications.
As your broker or adviser, we can work with you to review your insurance policies, identify any coverage gaps, and ensure your investment is well-protected.
