Townhouse Purchase – Incidentals and Annual Expenses
When you have picked a townhouse to buy either as an owner occupier to live in or for investment there are going to be several costs associated with the purchase.
We recommend using a property conveyancer or solicitor to check over the contract of sale on your behalf. The cost can vary depending on how much time you spend with them asking questions and reviewing but essentially it gives you peace of mind that a professional in their field has reviewed the contract of sale with your best interests at heart.
Property Insurance is a must for your townhouse. Depending on the body corporate agreement – body corporate can insure the entire development and it is included in the annual body corporate cost or if not then you will want to get insurance for your townhouse – this will vary depending on which insurance company you use.
Everyone’s financial status is different and this is case by case scenario but in general mortgage insurance comes into play with your mortgage broker or bank when you have less than 20% cash or capital equity in your townhouse purchase. We are not experts here but if you ask your broker or bank they will be able to run you through this.
Council rates are an annual expense and vary from state to state, suburb to suburb and also depend on the land size and property size is – there is no set scale or resource to look up what this will be but most developers and builders would have been given ball park estimates from the local council.
Water rates are a month to month expense and depend on how much water you use! So taking short showers and not too many pot plants is recommended.
Body corporate fee is an annual expense and varies from development to development and covers things like the rubbish collection, insurance to public areas, cleaning of public areas, maintenance or improvement fund for the physical condition of the development and things like if there is an elevator or lift repair and maintenance.
Connection service provider fees vary depending on which provider you use for gas, electricity or water, some companies provide all three now which makes life a little easier to pay bills.
If you are a property investor and bought your townhouse to rent to a tenant then there are a few costs you need to be aware of and again these can vary from state to state and also from one rental agency to another.
Advertising fee is the fee to put the property on a website where potential tenants can view and enquire for your property.
Photography fee, this will depend if you have decent enough photos but usually agents will recommend these are professionally done and this price will vary to who you use.
Let out fee, this is like a signing on fee or success fee and can be 1 or 2 weeks rent, basically once an agent has opened the property for viewing they will receive applications, review and investigate the townhouse applications and review the potential tenants rental history, professional and social references, salary or income and then once you have picked and or approved on signing of the lease this releases a fee. You will not need to pay this upfront – it will be taken from your rental income.
Management fee, this fee is the day to day, month to month fee of managing the property, such as invoicing your tenant, fielding telephone calls if any maintenance needs to be carried out and so on.
If your townhouse needs any maintenance and it is brand new or off the plan if may be under warranty or guarantee so always check this – if the townhouse property fixture and fittings are not under warranty then this will be an out of pocket expense for you.
If anything major happens and something needs to go to the tribunal then the agent will usually charge an hourly fee – this will be indicated in your rental authority you sign with the agent.
Townhouse depreciation schedule for fixtures and fittings is typically over 10 years for fixtures and fittings and over 40 years for the physical building. Depreciation schedules are sometimes provided as a guide by townhouse developers however for accuracy it is best to get a depreciation schedule completed for your own townhouse.
Stamp duty on property including townhouses in Australia is a type of government tax, it can be quite confusing as the percentage tax on property varies from state to state and in cases such as in Victoria the off the plan Stamp duty was changed on July 1st, 2017. Whether the townhouse you purchase be off the plan, under construction or complete and built stamp duty amount varies from state to state. Off the plan property stamp duty savings in Victoria for example was changed on July 1st 2017, it is always best to check on any number of government websites as a guide. The stamp duty for First home buyers in Victoria for example has 100% savings under $600,000 for of the plan and established property and the stamp duty payable between a purchase price of $601,000 to $750,000 is a sliding scale. Confused? Yes well we are too! Best to ask us, stamp duty estimates on whichever property you are enquiring about for a clearer idea of the costs.
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