Was just wondering is there a general rule of thumb when estimating rental property expenses (excluding loan repayments) i.e 40% of rental income – including expenses such as council rates, maintenance, insurance, repairs, management fees etc?
Thanks for your help
Each of these are variables depending upon the area you are investing and the property type: newer areas often have higher rates than established area as the council is still establishing the facilities, insurance varies depending upon risk (rough areas etc), repairs/maintenance – ballpark it at the same rate as general depreciation (2.5% pa of building cost), management fees vary depending upon each state eg WA may be up to 10%, Sydney/Melbourne 5-8% depending upon the number of properties and quality of property manager.
Most banks will assume that the costs are around the 20% – 30% mark when assessing your borrowing capacity.
As Scott said though – it can vary quite a bit between properties and their locations. Using a property manager or self managing will also play a part.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi,
I can't see the point of guessing.
If you see a property you like get the figures and work out whether it fits your criteria.
Some units have exorbitant strata fees etc. You need to know all of the costs before you buy anything. Of course maintenance, repairs will change more that rates etc. By doing building reports, strata searches there shouldn't be any major surprises though. I know some people budget 5% for repairs and maintenance.
Most banks will assume 20% as a "rule of thumb" but it is case by case due to many variables as stated by lukecrawford above.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
As the boys have pointed out, the lenders will have their own special formula that they use when calculating serviceability. You yourself do not have to use such a general formula. Nothing wrong with a bit of precision. If you are interested in a property, you find out the current cost of its holding costs such as its council rates, water rates, insurance, and body corporate fees if applicable. Then you know for sure.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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