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Buying an investment property is a popular form of investment but you need to be aware of the financial implications.
You'll need to consider:
- rental income
- depreciation
- land tax and capital gains tax
- landlord and building insurance
- the type and location of the property
- the transaction costs of the purchase
- whether the investment will be negatively or positively geared
- whether you'll self-manage the property or engage an agent
- ongoing repair costs.
Calculate how much you can borrow, including all expenses of a home loan, such as:
- interest rates
- stamp duty
- account keeping fees
- insurance
- pre-purchase inspections
- legal, application, value and settlement fees.
You will also need to answer questions like:
- Do you have a deposit saved? The usual amount is 20 per cent of the purchase price, but the more you can save the better.
- Will you have to pay mortgage insurance?
- Have you accounted for all transaction costs (legal, inspections, government charges, financial costs, moving costs)? Up to 5 per cent of the purchase price can be added in just these costs.
- Do you want to buy an existing property or build your own?
If you have an existing property, you may be eligible to use equity toward your investment property loan.
For more information about property investments, explore our Investor Hub.
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