A Quick Guide to Initial Costs in Real Estate Investment

A Quick Guide to Initial Costs in Real Estate Investment

In contrast to other western countries that are still struggling to get out of the global financial crisis, the Australian economy has surged back to health. Currently it's a seller's market in Australia as far as demand for residential units is concerned. Major cities like Melbourne, Sydney, Adelaide, Brisbane, Canberra, Perth, and Darwin can hardly keep up with the demand for houses. Regional areas are expected to benefit as well with the spillover of economic progress in the urban areas.

One thing potential investors should know: Purchasing properties in Australia is an exclusive right of permanent residents. If you're a foreigner or a new immigrant, you are required to seek the approval of the Australian government to invest in real estate.

Is it possible to invest in real estate without having substantial funds? Yes, it is. You will need an excellent credit history, must be employed or own a business, and have the ability to manage finances. If you have these qualifications, you have a good chance of getting your foot in the door of real estate investment.

Making an honest assessment of your financial capability is the first step. Determine if you will use your personal funds, how much you need, and if you should obtain additional financing for your real estate project.

Next you have to research what costs will be incurred in buying a property. The internet is the best source for information concerning property investing sites in the places you're interested in.

Five percent would be a safe estimate of the purchasing cost vis--vis the total purchase price. This will comprise stamp duty, legal fees, and other taxes for the property. However, the amount will vary depending on the property's total value and on which state it is located.

There are a number of other costs you need to plan for :-

Taxes :

- Stamp duty is collected by the state in certain transactions, including purchase of real estate.

- Land tax may be applicable. It is a state tax collected yearly by the state from land owners.

- GST (Goods and services tax) may be may be slapped on some property purchases. This is fixed at 10%.

Insurance On signing the contract to purchase, you will have to secure an insurance cover note for the property until full settlement then full insurance will be required.

Deposit Some vendors may want up to 10% deposit of the total loan value when you sign the contract. This is dependent on where you buy the property.

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