Private Landlord How Do You Know The Hidden Costs Of Purchasing An Investment Property
If you are considering becoming a private landlord or property investor it is advisable to know the hidden costs of getting a rental property.
It doesn't matter which country you wish to invest in there are always 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 never that simple I am afraid, there's always someone, normally governments, (local, state, national or federal) and the legal profession that want to stick you for a share of your hard-earned cash. They aren't content with taking a share of your profits and earnings, they want to hit you everytime you purchase a property.
Sure they may call the hidden charges "administration fees", may very well be they are just ripping you off, however you must pay anyway.
So apart from the money you agree to pay to the seller of the property you want to buy, there are additional charges you must allow for in your purchasing costs.
Depending on the country you're purchasing property in, the charges could be called "Title fees" or "Conveyancing Fees". These are the charges for registering the title in your name on the local property register. The costs differ by country, in some countries you are able to do this your self, in others you need a lawyer (solicitor/attorney).
"That's it then, I'm done, I just pay the seller and the title charges"
Well not yet, there's "transfer tax" or "stamp duty" this is often a local government charge (another grab for your cash) permitting you the private landlord the privilege of transferring the property from the owner to you.
Within the USA sales tax ("whoa you did not mention sales tax" -, I am not finished yet) sales tax - this tax is not always imposed on the acquisition of property. But in 36 US states a property transfer tax of 1% to 5 % is charged on the assessed value of your property. Stamp duty might also be charged if you take out a mortgage but not if you pay cash.
In The UK, stamp duty is applied on your buy price and varies from 0% - 5% depending on the price band your buy price falls within.
In Australia they could not have made working out stamp duty more complicated even if they tried. Firstly it varies by state. It's a 2-part tax. The first part is either a flat fee or a percentage of the first purchase price band, the second part is a percentage of the "dutiable value" of the property and may be as much as 6.75%. There are several buy 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 seller, the title charges and the transfer tax?"
No, no, no, you're not finished yet, in most places there is 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's accountable for paying the council tax within the UK is an entirely different issue, it was much less complicated when they had "rates".
In Australia Private Landlords also must pay land tax to the state government which is an annual cost primarily based on the nominal value 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 apart from the optional costs which really aren't optional.
Property Inspection Fees
No self respecting private landlord should purchase a property with out getting a comprehensive property inspection done.
Insurance coverage
Building or Private Landlord Insurance coverage is a must have. Your insurance costs will likely be higher on unoccupied properties so be sure you let your insurer know the minute it has been let. Then they will reduce your insurance charges and any excess.
Maintenance And Repairs
You must allow a regular amount for ongoing maintenance and repairs. It is a fact of life.
Even though you have to pay all these hidden costs, being a private landlord continues to be worthwhile for the majority of private landlords.
About the Author
As a Private Landlord to keep your costs down it's worthwhile to find the best renters as soon as you can. We help you do just that so that you are profitable quickly. Try our web page at http://privatelandlord.org
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