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Figuring out the cost of buying a property – whether it’s an investment property or you intend to live in it – means wading through a long list of up-front, hidden and extra costs. Some you can choose to pay but most are unavoidable. Take a typical $150,000 home purchased with a 15% deposit. By the time all the costs are included, the actual purchase price has climbed closer to $165,000. Here is how.
A registered property valuation may be required for a home loan and costs $250 to $500. Then there is the option of a professional pre-purchase inspection. These are highly recommended as they give buyers a more thorough idea of the property’s condition. Depending on the property you are considering buying, there are several other inspection reports which you may feel are worthwhile obtaining. An inspection report by a building consultant will cost $300 to $800, while an engineer’s inspection may cost anything from $500 to $2,500. A pest inspection to identify signs of past or present infestation will cost $140 to $220. Additionally, you may choose to purchase the property’s Land Information Memorandum (LIM) or Property Report from the local council ($100 to $350 each).
 Cost: $1,400 - $4,100
Standard home loan approval fees range from $0 to more than $500. However it is possible to cut bank fees significantly by tailoring your home loan to your particular circumstances. Ask your lender about special packages that offer discounted rates and fees, particularly if you are borrowing $150,000 or more. You can negotiate to add various costs (such as approval fee, first year’s insurance, valuation and solicitor) onto your home loan. But don’t forget you’ll be paying interest on these costs.
Cost: $0 - $500
The process of transferring legal title into your name is called conveyancing. Solicitors or conveyancers’ fees will vary according to the type of property, the purchase price and the firm you use. Including a contract examination, expect to pay anything from $600 to $1,800. On settlement, you may also be required to pay shares of water and land rates charges ($100 - $1,000).
Cost: $700 - $2,800
If your deposit is less than 20% of the value of the property, you may be required to take out Lender’s Mortgage Insurance. This protects the lender if you default on the loan. This one-off fee varies according to the size of the loan and your deposit. Expect to pay up to $1,800. Your lender may also require you to take out personal mortgage protection insurance to protect you financially, should you be unable to meet the repayment due to accident or illness. Comprehensive building insurance is another must. There are a number of policies now specifically designed for property investors. These cover not just the building itself, but chattels such as carpets, blinds, drapes, etc. They also insure against the tenant leaving or being evicted whilst owing rent. Whatever cover you choose, don’t omit to mention that the property will be rented, as failure to do so could result in the claim being rejected.
Cost: $1,000-plus
If you are upgrading to a new house and using your old home as an income, remember to factor in your relocation costs. Professional property movers cost around $500 to $1,200. Moving insurance is an optional but highly recommended extra ($250-plus). Don’t forget the cost of connecting utilities ($100 - $300), changing the locks ($120) and cleaning ($80 to $300).
Cost: $600-plus
Finally, it is a good idea to allow for unexpected costs of around 10% of the purchase price. This budget can cover ‘unforseen’ repairs needed to make the place appeal to future tenants or a cosmetic update. So what looked like a $150,000 investment has actually cost closer to $165,000.
While all the little extras do add to the total purchase price, this doesn’t mean that property investment is out of reach for ordinary buyers - on the contrary. Property remains one of the safest and most popular forms of investment. Benefits include capital growth, the security of bricks and mortar, and the ability to add value to your investment over time. And with property prices currently growing strongly, investors are enjoying healthy capital gain.
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