Private Landlord How Do You Know The Hidden Costs Of Purchasing A Property To Rent Out

If you are considering becoming a private landlord or property investor you should know the hidden costs of buying an investment property.

It doesn't matter which country you want to invest in there are usually hidden costs.

"Well what do you mean hidden costs?"

"Don't I just negotiate a figure with the seller and arrange finance?"

I'ts never that simple I am afraid, there is more often than not somebody, normally governments, (local, state, national or federal) and the legal profession that want to stick you for a percentage of your hard-earned cash. They are not content with taking a share of your profits and earnings, they need to hit you everytime you purchase a property.

Sure they will call the hidden costs "costs of administration", may very well be they are just ripping you off, but you need to pay anyway.

So other than the money you agree to pay to the owner of the property you wish to buy, there are additional charges it's important to factor into your buying costs.

Depending on the country you are purchasing property in, the fees may very well be referred to as "Title fees" or "Conveyancing Fees". These are the fees for registering the title in your name on the local property register. The costs differ by country, in some countries you are allowed to do this your self, in others you need a lawyer (solicitor/attorney).

"That is it then, I'm , I just pay the seller and the title charges"

Well not yet, there may be "transfer tax" or "stamp duty" that is often a local authority charge (another grab for your cash) allowing you the private landlord the privilege of transferring the property from the seller to you.

In the USA sales tax ("whoa you did not mention sales tax" -, I'm not finished yet) sales tax - this tax is not always imposed on the purchase of property. But in 36 US states a property transfer tax of 1% to 5 % is charged on the assessed value of your property. Stamp duty may additionally be charged if you take out a mortgage but not when you pay cash.

In The UK, stamp duty is applied primarily based on your buy price and varies from 0% - 5% depending on the price band your purchase price falls within.

In Australia they couldn't have made figuring out stamp duty more complicated even if they tried. Firstly it varies by state. It is a 2-part tax. The first part is either a flat fee or a percentage of the first purchase price band, the second part is a percentage of the "dutiable value" of the property and can be as much as 6.75%. There are several purchase price bands each with its own flat fee.

"But didn't I just pay that within the "Title Fee (Conveyancing )".

Sorry no, the transfer tax (stamp duty) is a transaction charge and the best part is - you get absolutely nothing for it, it is just a tax.

"So now I'm done?, pay the seller, the title charges and the transfer tax?"

No, no, no, you are not done yet, in most places there is also a community tax which is called "property tax" in the USA, "rates" in Australia and "council or poll tax" in the UK.

Who is accountable for paying the council tax within the UK is an entirely different issue, it was much simpler when they had "rates".

In Australia Private Landlords also must pay land tax to the state government which is an annual cost based on the nominal worth of the land on which a property is built. And no prizes for guessing who sets the land value.

"OK now I'm done surely?"

Well aside from the optional fees which really aren't optional.

Property Inspection Costs

No self respecting private landlord should purchase a property with out getting a complete property inspection done.

Insurance

Building or Landlord Insurance coverage is a must have. Your insurance coverage costs will be higher on vacant properties so make sure to let your insurer know as soon as it has been let. Then they'll reduce your insurance charges and any excess.

Maintenance And Repairs

You have to set aside a certain amount for ongoing maintenance and necessary repairs. It is a part of doing business.

Despite the fact that you have to pay all these hidden costs, being a private landlord continues to be worthwhile for the majority of private landlords.

by: Steve Barker

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