Thinking of buying an investment property, and have a budget in mind? Know exactly how much you can afford and don’t want to pay a cent more?

If you aren’t careful you can get stung with extra, hidden, or ongoing costs on your investment property.

Below are some common problems that can be a real drain on your bank account…

Buying an older property

Older homes may be less expensive in the short term, but you may end up forking out much more for maintenance and repairs. Things like repairing fixtures or fittings- an oven or hot plate that stops working, old hot water systems that run out of steam, the need to replace carpet or other floor coverings, problems with existing or old plumbing systems.

There are a huge number of things that could wear out, break, go wrong, or that could have been poorly installed, used cheap materials that won’t last, or been a dodgy DIY by previous owners- and a lot of this you won’t find out until later on down the track when it becomes a problem. Building a new home mitigates most of these risks and may just cut ongoing expenses by more than you could imagine.

A drop in property value

If you don’t do your homework on the area you are buying in, and consider how the value of the home will change in 5, 10, 30 years, you could end up with an investment that takes money instead of returns it. An example is purchasing a property when the mining boom was in play, and then being left with a property that was no longer in demand by renters once mining jobs dropped away.

Instead of putting all your eggs in one basket,  choose a suburb that has renters from many different employment sectors, has appeal in terms of infrastructure, has a community that includes desirable renters and is in a nice area, and that has a trend towards growth that you can be confident isn’t just temporary.

Extra costs

If you decide to build, make sure the quotes you receive are for the whole package- land construction works, driveways, landscaping, flooring, fixtures, paint etc. You want to know what the costs will be for a totally completed home that is ready to rent out, not the price of land and a basic build that has tens of thousands of dollars of extras on top of the quoted price before it is in a state that is liveable.

Also be wary of inflated prices. Depending on who you go through, you could end up paying $10-25K more for an equivalent house if commission cuts are high. Best plan of attack is to compare all your options- find businesses that offer turn key homes, then look at the list of inclusions, check land and home sizes, and narrow it down to best price.

Want some practice? See how our homes stack up against the rest here >>