Before diving head-on into purchasing an investment property, it’s important to make sure investors understand all of the ongoing costs that will be involved. Although many of these are tax-deductible as expenses of your investment ‘business’, the asset must produce healthy and sufficient cash flow to pay bills during the year to reduce personal funds being called upon.


  • Stamp duty: Although most buyers are aware of this duty, many are blindsided by how high this cost can actually be. Stamp duty is a tax charged by government when Australians purchase land. The duty payable is typically based on the market value of the property or the purchase price, whichever is greater. Depending on the state you are purchasing property in or status of the property (ie: land or constructed dwelling), your stamp duty will be the most significant inital purchase cost (along with your deposit). Buying off-the-plan can save investors considerable money and lowers the cost of growing a large portfolio. Further costs could include mortgage registration fees, titles registration fees, or Torrens assurance levy.
  • Pre-purchase costs: If buying an established or older property, some responsible pre-purchase costs such as building and pest inspections help investors’ peace of mind and protect against significant repair expenses after settlement.
  • Conveyancing: A conveyancer is a crucial part of the purchase process by handling the intricate and formal details of transferring ownership of real estate. They will deal with the seller, titles office, mortgage broker and homebuyer to ensure the purchase is legitimate and secure, and eventually arrange for settlement to occur.
  • Mortgage insurance: A loan with a deposit under 20% represents higher risk and makes lenders buy a specific type of insurance, called ‘Lenders Mortgage Insurance’ (LMI). This insurance protects the lender (not the borrower) should defaulting on the loan occur. This cost can either be paid by the purchaser with cash, or ‘capitalised’ (added) into the total loaned amount and repaid in normal interest repayments.


  • Interest repayments: the largest ongoing expense will be payments made to the lender on your investment loan. These payments can be made on weekly, fortnightly or monthly frequencydepending on the repayment schedule or loan type selected. Thesize of regular repayments is variable based on the interest rate, but also whether the repayments are interest-only or principal-and-interest. Interest-only are popular for investors as only the interest component of a mortgage repayment is deductible, and it reduces each repayment to the smallest possible requirement. Of course, this will not actually pay down the balance of the loan, which needs to be considered over the longer investment term.
  • Council rates: As per your own home, council rates will be payable to the council/shire where the investment property is located.
  • Water rates: As per your own home, you will need to pay for the water/sewerage connections that supply to the investment property. However the actual water usage is directly charged to the tenants through an account with the water provider.
  • Building insurance: It is vital to protect your asset similar to other assets you own. Building insurance is required just like your own home and protects the bricks and mortar asset. If your investment is located within a multi-dwelling estate that uses any common area/facility, public liability insurance is required across the entire development (with the cost evenly apportioned to each lot owner). However, both the building and public liability insurances are typically provided within the estate’s Owners’ Corporation management fees and can often be substantially cheaper than individual insurance policies.
  • Landlord insurance: While your building insurance will protect the dwelling itself, it will not cover the internal contents. It is therefore highly advisable to purchase landlord insurance, which covers contents protection for the internal fixtures and fittings, but also damage/theft by your tenants to your property, legal fees from tenancy issues and default of rent.
  • Owners’ corporation fees (if applicable): If you buy a property in an apartment/estate complex with multiple owners, you will be liable for Owners’ Corporation (body corporate) fees. Owners’ Corporations exist to protect the integrity of everyone’s investment, and cover the cost of maintaining public areas in the complex, building and common property insurance, dispute resolution and book-keeping as required by legislation. These fees are typically paid quarterly and can be quite high if there are pools, gyms, lifts or recreation facilities onsite.
  • Repairs and Maintenance: No matter what condition your property is in when you purchase it, some degree of regular maintenance and servicing will be needed to keep it in top condition. This may be obvious in the case of a property clearly in need of refurbishment, but not all investors consider the useful small repairs that can accumulate over the course of a few years (and make tenants unhappy).
  • Property Management fees: Many investors choose to hire a professional property manager to look after their property. A property manager typically charges 5-8% of the overall rental income, but the cost can be well worth it as they deal with maintenance issues, repairs, finding tenants, rental problems and even book-keeping on your behalf.
  • Land tax: Generally if your total land holdings have a total taxable value of $250,000 or more (excluding exempt land such as your own home) you must pay land tax to the government. For example in Victoria, if the land value is considered $250,000, land tax of approx $275 is payable per year (rate as of 2015)
  • Book-keeping/accounting: You may choose to use an accountant to keep track of the income/expenses and prepare the end of year tax return for the investment portfolio.

As you start to plan ahead for your property investment Melbourne, be sure to factor all of these costs into the final price. Buy Property Direct offers a full suite of property investment services that can guide you through the purchasing process. While they might seem like a never-ending list of costs, remember the income that is generated by the property offsets (and likely covers) these cash expenses. Check out the previous article on who actually pays for your investment property.