The investment property costs every rental provider should plan for

Like any investment, there are ongoing costs involved, and understanding them from the outset can help you avoid surprises, budget more effectively and keep those costs under control.

As property managers, we often see new investors focus on their mortgage payments while overlooking other expenses that come with owning a rental property. As a result, they end up spending more than they expected. 

Some of the key costs to factor into your budget include:

• Landlord insurance
• Repairs and ongoing maintenance
• Vacancy periods and tenant-finding costs
• Council rates, water charges and strata levies
• Property management fees

Landlord insurance is one of the most important protections available to property owners. Unlike standard home insurance, this is designed specifically for rental properties and may provide cover for renter-related risks, loss of rent and certain types of property damage. The right policy can provide valuable peace of mind when the unexpected happens and save you money in the long term.

Maintenance, repairs and replacement are also costs to factor in. While smaller jobs such as fixing taps, replacing fittings or repairing appliances are part of normal ownership, larger expenses can arise  when hot water systems, air conditioners and heating units hit their functional limit and need replacing. If you have a depreciation schedule and use it to get a tax refund at tax time, one idea is to set that money aside for a ‘rainy day’ so you can purchase a new appliance without the stress.

A vacant property can also affect your bottom line because you still need to pay the mortgage while covering the cost of advertising the property (including marketing, photography and property manager fees). Having a reliable and well-connected property manager will ensure your vacancy period is as short as possible and that you get quality tenants to help cover your holding costs. 

It’s also important to account for the ongoing ownership costs attached to the property itself. Council rates, water charges and strata levies can have a significant impact on annual expenses. For unit and apartment owners in particular, special strata levies can occasionally arise for major building works, upgrades or repairs that weren’t originally budgeted for.