Buying an investment property seems easy: you secure the mortgage, the tenant pays the rent, and there may be a minor difference that you need to front, no biggie!
Those seasoned investors know: this is not true at all.
To manage your investment funds effectively, a good idea is to keep expenses to a simple, consistent, weekly payment, rather than trying to manage the extra expenses as they come in. Creating a budget is a great first step. As an investor, there are three major categories of expenses.
Running costs, which include insurance, body corporate, rates, agency fees and water. Most of these are relatively fixed costs and can be easily budgeted for.
General repairs are harder to budget for, but rule of thumb, a newer property will consume around 2% per year. This is usually made up of compliance, like smoke alarm, blind cord and safety switch testing. A property up to 10 years old could consume around 6% per year, and after that I would budget for 10% per year.
Thirdly, there are capital improvement items. Your investment property won’t last forever without spending money on it. Carpets and paint will need to be refurbished every 8-10 years. You then have window coverings, appliances and exterior painting and gutters. If you own a holiday rental, you will need to consider how frequently you need to update the furnishings.
Our team at Inspire Property are experts in this field, feel free to contact us for a free consultation.