What are the costs involved in having an IP, & PM recommendations

Hi all

Might have to turn an apartment I just bought by mistake into an IP. Trying to crunch some numbers so I know what my options are. Could I please get some help as this is my first time having to do this - what are the costs involved in having an IP in addition to the usual strata fees? My guess would be
- IP management (4-5%)
- Landlord insurance
- Water service charges?
- Anything else?

Also can I please get some recommendations for a PM around the North Ryde area?

Thank you!

 

Council rates. But you can claim depreciation. Do you have a depreciation report?

 

Thanks! Not yet but I will get one

 

R&M - wear and tear seems to be higher in an IP; and you need to keep it looking fresh for the next tenant.
PM fees of all shapes sizes and guises.

 

Loan interest is normally your biggest expense, then strata levies if you have a unit.

If you find that you're struggling with IP expenses and it's affecting your lifestyle you may be able to arrange a tax variation to help your cashflow. Your accountant can help you with this or you can do it yourself via the ATO website. PAYG withholding e-variation

I have found that these tax variations are usually more useful for PAYG employees with regular, predictable incomes, rather than self employed.

 

How did that mistake happen?
More to your question, what's the reason you are now looking to turn it into an investment property? Is it a cash flow issue?

 

Very basic/crude calculator:




Checklist from my website for new Landlords:

 

Did you claim a reduction in stamp duty because the property was to be your PPOR?

If so, you may have to pay the additional stamp duty if you immediately rent it out, or otherwise don’t fulfill the conditions of the reduction.

Investigate.
Marg

 

I didn’t know there was a reduction for ppor so didn’t claim it. How much would the deduction be?
How long would I have to live in it before before I can rent it out?

 

Depends on which state you bought in and how much you paid - google is your friend.
If you used a loan to buy this property whoever the lender or broker was should've told you about any potential stamp duty concession available at the time of application, not sure if you can claim a concession after the purchase has settled so you might want to check that.
*note I've now read your other thread, $825K purchase price in NSW there would be no stamp duty concession applicable.

 

Ahhh it all makes sense now! Cheers Y-man

 

Thanks Michael. So Building Insurance is separate from Strata? I thought by Strata includes building insurance

 

Read it carefully. That example is for a house. Unless you have a unit with no body corp.

 

I have an apartment with body corp, but on the settlement sheet now i'm also seeing insurance costs listed separately?

 

@Mel Morgan from Progressive Property | Specialised Property Management - Sydney is looking after north Ryde and she is a gun of PM. Highly recommended.

 

'Body Corp Levies' normally encompass 3 things
1. sinking fund contribution
2. administration fund contribution
3. insurance levy contribution

To refer to them separately just complicates matters (IMO), however agents/strata managers sometimes do it to try and make it sound 'less bad' as in 3 lesser amounts may be perceived as better than 1 larger amount etc.

nb.1
4. 'special levy' - from time to time you might see this, it's when an unbudgeted item needs to be paid for and the body corp will issue a special levy to collect the money to pay for it

nb.2
on a strata property, the body corp levy (via insurance component) covers what you'd call building insurance on a stand alone property, the only other types of insurance you may have on a strata property (outside of the body corp levy one), would be a contents policy for various furnished items not covered by the building insurance (I think this is for floating floor boards, sun shades on windows, solar panels, etc - stuff that isn't body corp but part of your lot and not the tenants), and also landlords insurance to cover you for tenancy-related matters.

 

Don't forget to factor in indirect costs when crunching your numbers and cashflow. Don't assume 52 weeks of rent, factor in some vacancy and letting costs. Generally speaking a unit will turn over tenants a bit more than a house. A couple of weeks vacancy and letting costs can have a material impact on your numbers.

- Luke

 

Thanks Chris, much appreciated.

I think all the IP ownership expenses are basically covered, now you just need a great PM to keep track of them all