Property Related Expenses

[Robbiep]

Hi All,

Once you have decide on your strategy, in terms of buying, its important to accurately evaluate each deal.

The income derived from a property is pretty straight forward, which is the rental achievable.

The problem is the expenses, which can easily eat into the income of a property. I am trying to get a comprehensive list for properly related expenses for houses and units. Some which spring to mind are:

Mortgage Repayments
Vacancy rates (which can be calculated by a % of the rental i.e. 1-2%)
Property Management (which can be calculated by a % of the rental i.e. 7-8%)
Strata Fees (for units)
Council rates (how do you get an idea of these costs?)
Water (payable by tenant)
Electricity (payable by tenant)
Gas (payable by tenant)

Are there any other expenses related to a property which have not been mentioned?

I know there is also land tax.

Regards,
Robbie

 

[Lofty]

Hi Robbie

Maintenance. Some of which is covered by Strata Fees.

Also, in NSW, you can only charge the Water Usage to the tenant, not the service charge. And the Water Usage can only be charged if you have a certificate saying all taps in the property are low flow eco taps - or something similar ;-)

Cheers, Paul

 

[vaughan]

Insurance, maintenance, depreciation.

IMHO this detail isn't required to evaluate the deal. Calculating the rent, strata, council rates, water and vacancy rate creates an "index" is good enough to rank properties because insurance and many other costs are about the same or close enough to be considered a constant. (Arguably council rates could also be excluded, maybe water rates too, because they are about the same for most suburbs.) The simpler the index the quicker and easier it is to calculate.

IMHO the vacancy rate IS important because that's the only way you have of realising that the serviced apartment rented for $580 a week for 85% of the year is not returning as much as the unit next door getting $490 a week with 1% vacancy.

It's only when working out the final cash-flow position that all the other things are needed.

YMMV.

 

[vaughan]

And the Water Usage can only be charged if you have a certificate saying all taps in the property are low flow eco taps

No certificate is needed, and not required for all taps -- read the actual requirements. Just need to prove that they were there when the tenant moved in, best way is to mention them in the inspection report and photos. (And if the tenant replaces the lo-flo shower with a water-guzzler that's their choice.)

 

[Don K]

Depends how you finance but if you use cash from your saving/offset etc you need to consider how much it will cost you as a part of expense.

If you use $20K from your PPOR redraw/offset to buy your IP you would be paying $1400/year more for your PPOR on interest rate of 7%.