Investing in property is a popular way for Australians to grow their wealth. In fact, about 2.2 million Australians own at least one investment property. But before you buy, it’s important to know what you can afford, how much income you’ll need from rent, and the ongoing costs of being a landlord.

Buying a rental property can be a smart move – but only if you plan carefully. Without proper planning, you could end up with a property that becomes more of a financial burden than a benefit.

Know What You Can Afford

Before you buy, you need to understand:

• How much money you can borrow
  
• What upfront costs you’ll face
  
• How much it will cost to rent out and maintain the property
  

These costs can add up quickly, and it usually takes time to earn your money back.

Work Out Your Borrowing Power

Your local Mortgage Choice broker in Canberra can help you figure out how much you can borrow. This helps you set a clear budget when looking at properties.

They will talk to you about:

• Whether you’ll need a cash deposit or if you can use equity from another property
  
• If you can manage repayments – especially if the property is empty for a while
  
• How much you can spend on renovations or repairs
  
• What your upfront and ongoing costs will be
  
• What type of loan suits your situation (e.g. fixed rate or interest-only)
  

Once your broker understands your financial situation and goals, they can give you an idea of your borrowing limit and help you apply for pre-approval. Lenders also consider rental income when deciding how much to lend you.

Ongoing Costs You Need to Budget For

As a landlord, you’ll have regular expenses such as:

• Council rates and body corporate fees
  
• Insurance for the property
  
• Repairs, maintenance, pest control and cleaning
  
• Costs to advertise for new tenants
  
• Accountant fees
  
• Loan interest
  
• Land tax and strata fees
  
• Depreciation on the building and fixtures
  

Many of these costs can be claimed at tax time (talk to your accountant about this). Even though the costs can be high, they’re important to keep your property in good shape and appealing to renters – and to future buyers if you decide to sell.

It’s better to overestimate your expenses so you’re not caught off guard later. Your broker can help you plan for these costs.

What is Negative Gearing?

Negative gearing is when the costs of owning the property are more than the income you earn from rent. This creates a financial loss, but you can usually claim it on your tax to reduce the amount of tax you pay on other income (like your salary).

Be sure to speak with your accountant for advice on this.

Get in touch

Even if you’re brand new to property investing, there are many resources available to equip you with the knowledge and confidence to take that first step on the property investment ladder. And you don’t have to do it alone.
If you’re keen to buy an investment property, get in touch with Mortgage Brokers Canberra  on 02 61901219
. We’d love to help
you get started.