Private Landlord Do You Know The Hidden Costs Of Purchasing An Investment Property
Private Landlord Do You Know The Hidden Costs Of Purchasing An Investment Property
If you're thinking of becoming a private landlord or property investor you need to know the hidden costs of buying a rental property.It does not matter which country you wish to invest in there are usually hidden costs."Well what do you mean by hidden costs?""Don't I just negotiate a figure with the owner and arrange finance?"I'ts by no means that simple I'm afraid, there is more often than not somebody, normally governments, (local, state, national or federal) and the legal profession that want to stick you for a percentage of your hard-earned cash. They are not content with taking a percentage of your profits and earnings, they want to hit you everytime you purchase a property.Sure they'll call the hidden costs "costs of administration", may very well be they're just ripping you off, but you need to pay regardless.So aside from the money you agree to pay to the owner of the property you want to buy, there are additional fees you have to allow for in your buying costs.Depending on the country you are purchasing property in, the charges may very well be known as "Title fees" or "Conveyancing Charges". These are the charges for registering the title in your name on the local property register. The costs differ by country, in some places you're able to do it your self, in others you need a lawyer (solicitor/attorney)."That is it then, I am finished, I just pay the seller and the title fees"Well not yet, there may be "transfer tax" or "stamp duty" this is normally a local government fee (another grab for your cash) permitting you the private landlord the privilege of transferring the property from the seller to you.In the USA sales tax ("whoa you didn't mention sales tax" -, I'm not done yet) sales tax - this tax is not always imposed on the acquisition of property. However in 36 US states a property transfer tax of 1% to 5 % is charged on the assessed value of your property. Stamp duty may also be charged if you take out a mortgage but not if you pay cash.In The UK, stamp duty is applied based on your purchase price and varies from 0% - 5% depending on the price band your buy price falls within.In Australia they couldn't have made working out stamp duty any more complicated even if they tried. Firstly it varies by state. It is a 2-part tax. The first part is either a flat fee or a percentage of the first buy price band, the second part is a percentage of the "dutiable value" of the property and could be up to 6.75%. There are several purchase price bands each with its associated flat fee."But didn't I just pay that within the "Title Fee (Conveyancing )". Sorry no, the transfer tax (stamp duty) is a transaction charge and the best part is - you get absolutely nothing for it, it's just a tax."So now I am done?, pay the owner, the title fees and the transfer tax?"No, no, no, you are not done yet, in most places there's also a community tax which is known as "property tax" within the USA, "rates" in Australia and "council or poll tax" within the UK. Who is accountable for paying the council tax in the UK is an entirely different issue, it was much simpler when they had "rates".In Australia Private Landlords also have to pay land tax to the state government which is an annual charge based on the nominal worth of the land on which a property is built. And no prizes for guessing who sets the land value.
"OK now I'm finished surely?" Well except for the optional costs which in reality aren't optional.Property Inspection FeesNo self respecting private landlord should purchase a property with out getting a full property inspection carried out.
Insurance coverageBuilding or Private Landlord Insurance is a must have. Your insurance costs can be higher on unoccupied properties so make sure to let your insurer know the minute it has been let. Then they'll reduce your insurance charges and any excess.Maintenance And RepairsIt's essential to set aside a regular amount for ongoing maintenance and necessary repairs. It's a fact of life.
Despite the fact that you must pay all these hidden costs, being a landlord continues to be worthwhile for most landlords.
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