Confession: I would hate to start as a real estate investor today. I'm just not sure if it's worth it? The costs and considerations of compliance alone are almost enough to make you want to throw in the towel before you even start.
It is much more expensive than it was when I started, almost 20 years ago.
These days, when buying or renting a property, there are a number of additional costs and obligations that you need to consider.
In most investments, the rent generally covers the mortgage. This is a general generalization, but overall, mortgage interest will be your biggest expense, and in the current market – even taking into account the deductions related to COVID- 19 – the rent covers the mortgage.
There are however other expenses which you will have to cover with your own income.
These include homeowner's insurance, property management fees, municipal rates, building and content insurance (content covers things such as carpets and blinds), as well as ongoing repairs and maintenance.
If the property is an apartment or unit, you will also have to pay strata fees.
In addition to that, you may have to pay for:
Safety switch compliance – to ensure that the electrical safety switch is up to date and working. Replacement of the safety switch can cost around $ 300 if it is defective.
Compliance verification or pool certification; one-time fee, approximately $ 150
Compliance of window blinds; this can be provided with compliance with smoke alarms and it is something you can do yourself, but if your property is interstate you will have to pay a company an annual fee of around $ 100 to fix it on your behalf. There are strict guidelines on your obligations as a homeowner when it comes to smoke detectors.
In Queensland, you must also perform a compliance check on your water systems before you can bill the tenant for water usage. It costs a little sensation, then if your water systems are not found to be efficient, it can cost hundreds of dollars (if not thousands!) To upgrade them.
All of the above can represent a really large sum.
Is it even worth all the stress, time and effort – especially with all of these new laws that were introduced after COVID-19 that greatly benefit tenants?
It may look like a mug game.
Until I can remember why the property works.
I recently read a beautiful Victorian terrace that went on sale at Crown Street, in the heart of Surry Hills in Sydney.
The terrace is on the market for the first time in 45 years. It was last traded in 1978, when it was purchased for the princely sum of $ 65,000.
It is now listed with a price guide of $ 3-3.3 million.
Over the past five decades, its value has doubled more than five times and its value has increased by about 5000%.
How can everyday Australians with little financial knowledge and investing in education make profits and wealth like this if not in real estate?
Do you own investment properties or do you plan to invest in the future? Learn about the destination of real estate prices after the pandemic with in-depth advice from an experienced investor.
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