Uncovering the Hidden Costs Involved in Investing in Property


Investing in property can be one of the most worthwhile ventures a person can make. However, the path to real estate success is peppered with hidden costs and, in the current Australian market, these may be more complex than you’d initially think.

Furthermore, for those not bothered by the upfront cost, these often-forgotten expenses can mess up even the most carefully made financial plans, leading to unexpected financial problems.


The Down Payment Dilemma

Knowing Your Loan-to-Value Ratio (LVR)

Investing money often leads to extra costs that can limit financial freedom. In Australia, the Loan-to-Value Ratio (LVR) is important. High LVRs mean you can buy a property with a small down payment. But a bigger mortgage means higher interest payments and having to pay mortgage insurance if you don’t have at least 20% equity.

Interest Rates and Mortgage Brokers

Additionally, Interest rates need to be calculated over the life of the loan, potentially amounting to more than the property’s initial price in interest alone. Here is where an experienced mortgage broker is helpful, finding the best rates and helping to keep the long-term loan charges in check.


Rates, Levies, and Water Bills

Council Rates

Before the ink on the contract is dry, aspiring landlords are hit with council rates. For real estate newbies, these are local taxes based on the property’s value and location, indirectly affected by market conditions and property developments around the area.

Strata Fees and Owners Corporation

Strata fees, or the more formal Owners Corporation, are a part of multifamily property living and come in monthly, quarterly, or annual forms, covering everything from shared services to building amenities.

Water Bills

Often glanced over, water consumption charges and sewerage drainage can add a considerable weight to the monthly bills of a property investor. Understanding water efficiency can save a small fortune and bolster the bottom line.


Insuring Your Investment

Home and Contents Insurance

A necessity perhaps as old as property ownership itself, home and contents insurance vary tremendously in price and coverage, with the former affected by international insurance trends—not just national ones.

Landlord Insurance

Property owners should strongly consider this specialised type of insurance. It’s tailored to protect against the unique challenges of renting, offering coverage for lost rent, tenant damage, or legal disputes.

Depreciation Reports and Taxes

Often overlooked is the potential tax benefit of investment property. By determining the depreciation of assets, like flooring or appliances, investors can make substantial claims come tax season, thanks to the ability to deduct ‘depreciation’ from your taxable income.


The Management Problem

DIY Property Management vs. Professional Services

Property management duties can be daunting, from dealing with tenants to overseeing maintenance. While the hands-on approach can cut costs, it also eats heavily into personal time and can lead to disastrous vacancies, legal infractions, or tenant disputes.

Variable Marketing and Lease-up Costs

When the ink hits the ‘vacant’ status on the calendar, the clock starts ticking on lost income. Marketing an empty property is a recurring variable cost whose effectiveness can change radically with time.


Ageing Infrastructure and Repairs

Staying Ahead of the Ageing Curve

The eaves, the pipes, the foundation—all have an effective lifespan that when crossed, add a red mark to the property’s financial ledger. Investors should enter the property market understanding the current state of inclusions and possible renovations ahead.

Tax Implications of Repairs

Knowing when an expense crosses the line from repair to improvement, the latter which can often be claimed as a deduction, is a nuanced and vital aspect in property maintenance and tax management.

Final Thoughts on the Cost of Real Estate

The Maturation of an Asset

In the end, property is a long game. The initial excitement of purchase must be tempered with a realistic view of the long-term costs, including commission fees upon selling, capital gains taxes, and any additional unexpected expenses.

Due Diligence: The Investor’s Mantra

Before making your foray into the Australian property market, due diligence is crucial. This involves not only financial planning but also educating oneself thoroughly on the complexities of real estate investment and tax laws.

Leveraging Professionals

The unseen costs in property investing are, by their nature, difficult to foresee for the untrained eye. But by leveraging professionals, staying apprised of market and legislative changes, and maintaining a meticulous attention to detail, investors can reduce the element of surprise and establish a more solid financial footing in the real estate world.


This deep-dive into the often-overlooked expenses of property investment in the Australian context is just the beginning. For first-time homebuyers and seasoned investors alike, understanding and planning for these costs is paramount. By diligently researching, budgeting, and engaging with the right professionals, the risks and costs of property investment can be managed effectively, turning your investments into the solid backbone of your financial future.

If you would like to start building a secure financial future, please click here to organise a complementary meeting with an EPG Wealth adviser.

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