Working out how much an investment property will cost to hold isn’t that difficult
In fact, it’s something you can quickly work out on the back of an envelope.
Think of it like this. On the one side you have income (rent) and on the other you have expenses (loan interest repayments, rates, property management fees, insurance and maintenance costs).
So if you took out a $300k loan on a property that receives $400 per week rent.
The holding costs will be worked out as follows:
Rent: $20,800 per annum ($400 x 52)
– Mortgage repayments: $21,000 per annum (based on 7% interest only rate)
– Rates: $1200 (a rough figure that will change from council to council)
– Property management: $2,080 per annum (based on 10% of rent)
– Insurance: $500 (premiums vary – get a few quotes)
– Maintenance: $600 (a rough figure that will vary depending on property)
Total costs: $25,380
Total holding costs
$25,380 (costs) minus $20,800 (rent) = $4580 per annum or $88 per week.
This property is roughly costing you $88 per week to hold. Once you claim depreciation and negative gearing – this amount will be less.
If you would like a more in-depth analysis of holding costs and forecasted growth – feel free to use the Property Investment analysis spread sheet.
Please note: The above explanation provides a simple breakdown of the costs associated with owning an investment property. The example covers a traditional lease agreement – and not short-term holiday accommodation which can provide varying results as touched on in a blog post by Team BnB (a Noosa Accommodation agency on the Sunshine Coast). Each investor’s situation is likely to be different in terms of the costs associated with their investment property. For that reason, this breakdown should only be referred to as a rough guide to working out holding costs.
If you’d like to have Jamie provide advice on your finance structure, investment strategy, first home purchase, upgrade or refinance simply complete and return this FORM and he will be in touch – this is a FREE, no obligation service.
The information herein is not intended as investment, financial, legal, taxation, building, development or any other advice and must not be relied upon as such. You should obtain independent professional advice and make further independent enquiries before making financial, legal, taxation, building, development or investment decisions.