Upfront Costs of Investing in Real Estate

Can you still invest in real estate even with little money on hand?  The answer is yes, you can. If you’ve got a good credit rating, are employed or operating a business and someone who knows how to manage finances well, then you have every chance to get started in property investing.

First, you need to evaluate your financial capability. Decide whether you will use a some of your own personal funds in the deal, how much is required and whether you will need additional finance to fully support the real estate project you are about to start.

Researching the costs involved in purchasing a property is key. Check the internet and visit property investing sites that cover the areas you wish to purchase in.

Purchasing costs can be estimated at five percent of the total purchase price. This may include legal fees, mortgage application fees, stamp duty and other taxes for the property. The amount, however, can differ depending on the state where the property is located and the total value of the property.

So what are some of the other upfront costs that you have to keep in mind?

Deposit. Depending on where you buy, some vendors request up to 10 percent deposit of the total loan value upon the signing of the contract.

Insurance.  Once you sign a contract to purchase, you need to arrange an insurance cover note for the property until settlement then full insurance will be required.

Taxes. Purchasing a property always involves payment of certain taxes.

a. Goods and services tax or GST may be applicable to some property purchases and, in Australia, is pegged at a flat rate of 10 percent.

b. Stamp duty is a state tax covered in different transactions including the purchase of real estate. This can either be on a fixed rate or on an increasing scale. The total value of the property is considered in calculating the stamp duty.

c. Land tax may be payable and refers to a state tax that is charged yearly to land owners. It is based on land ownership or land usage in some states. The tax is charged on the total unimproved land value at a specific date. The rates and thresholds may vary from one state to another.

Consulting a real estate lawyer is your best option when it concerns investment costs.

By Wendy Moore, Founder, www.savvywebwomen.com