Beyond the Mortgage: The Real Costs of Being a Rental Provider

Building a realistic budget from the outset is one of the best ways to keep your investment running smoothly and avoid being caught off guard. 

Here are some costs to factor in:

• Rental Provider insurance

A standard home and contents policy usually doesn’t cover the risks associated with renters in your property. Rental provider insurance fills that gap, protecting both the building and the rental income it generates. Depending on the policy, cover can extend to certain types of damage, loss of rent and renter payment default. It’s well worth reviewing the policy wording closely to know exactly what’s included.

• Repairs and maintenance

Even recently-built properties need regular upkeep. Small jobs like leaking taps, faulty power points or worn-out fittings tend to come up throughout the year, and larger items can hit harder. Replacing a hot water system, gas heater, or air-conditioning unit can run into the thousands, often with little warning. Setting aside a maintenance buffer each month and ensuring you have a depreciation certificate to share with your accountant will help you manage these costs without disrupting your cash flow.

• The cost of finding a renter

Vacancy is one of the more underestimated expenses of property investing. While the property sits empty, you’re still paying the mortgage, council rates, strata fees and any other holding costs, while also covering the cost of getting the property re-let. Listing fees, professional photography, marketing and the power needed for inspections all add up. The sooner the property is leased to a quality renter, the smaller the impact on your bottom line, and that’s where having an experienced property manager is valuable.

• Ownership rates and strata levies

On top of council rates and water charges, apartment owners also need to budget for strata or owners’ corporation levies. Many investors tend to focus only on the standard quarterly levy and overlook the special levies that can be raised for major works, such as roof replacement, lift upgrades or shared plumbing. Knowing these can crop up at any time helps you plan ahead and treat your rental like the business it is.

• Property management fees

These are among the few costs that deliver a return on investment. By enlisting the help of a professional to manage your property, you can ensure it is compliant, have rent collected on time, find renters sooner and avoid the risk of a costly trip to the Tribunal. You will also save hours of time and be spared the stress of trying to find a repairman late at night if something goes wrong.