How to minimise the holding costs of your investment property

While there is the potential for long-term growth in the value of a Perth investment property, there are costs involved with owning this kind of asset.

To maximise profits, it’s important to minimise expenses strategically. As property managers, we aim to help our clients reduce expenses as much as possible. Take a look at some information and tips from our team.

What are investment property holding costs?

Holding costs are all the things that add up to put you out of pocket when you own an investment property in Perth. The costs include outgoing expenses that you need to pay on a regular basis.

For example:

• Council rates
• Strata fees
• Management fees (which we will discuss in more detail shortly)
• Upgrades to the home
• Repairs and maintenance
• The cost of the mortgage

How to minimise holding costs

As interest rates rise and mortgage repayments increase, minimising the expenses related to your investment property is crucial to generating more profit.

Here are some strategies to reduce your holding costs:

• Stay on top of maintenance: Maintenance costs can put a serious dent in your pocket. By ensuring maintenance is dealt with swiftly, you can stop issues, and therefore costs, from escalating out of control.

If you’re looking to buy an investment property, it is also smart to be highly aware of the condition it is in, so you know what costs you might incur. Ask for strata or building reports so you can be aware of any hidden issues.

• Get insured: Unfortunately, there’s always the potential for damage to the investment property due to a range of reasons. Insurance may seem like another bill to pay, but it will save you from paying a large amount if something goes wrong. We always advise our clients to take out insurance as part of the cost of owning a rental property.

• Monitor rental prices: It’s always best if your rental income covers as many of your out-of-pocket expenses as possible. If your tenants’ contract has expired and you are dealing with rising interest rates, consider increasing the amount you charge so you’re not losing out. With Perth rental vacancies being so low at the moment, you may have the ability to impose a change of costs. Speak to us to find out more.

Tax deductions

Many of the expenses involved with owning an investment property are tax deductible. Work with your accountant to find out what you can claim as a landlord in Perth as a way to minimise your holding fees.

Investment property tax deductions include:

• Advertising for tenants
• Bank charges
• Cleaning
• Gardening and lawn mowing
• Insurance
• Land tax
• Pest control expenses
• Property manager fees and commissions (including prior to the property being available to rent)
• Secretarial and bookkeeping fees
• Servicing costs, for example, servicing a water heater
• Stationery and postage related to the management of the property
• Telephone calls related to the property

You can also claim deductions on the interest on your home loan and costs associated with renovating the property. Keep a record of every expense and share them with your accountant.

Depreciating assets

Another thing to be aware of is depreciation.

This means you can claim tax deductions based on the decline in value of the building’s structure, items permanently fixed to the property and even some of the appliances.

Work with a specialist provider to request a depreciation certificate (the cost is usually a few hundred dollars). Share this with your accountant and they will use it to claim deductions on depreciable assets within the property on your behalf. Check out the ATO website to learn more about how this works.

Use a property manager

While some people see self-managing their investment property as a way to minimise the holding costs of an investment property, this approach is usually false economy.

Firstly, if you don’t use a property manager, you lose valuable time. Depending on what your time is worth, it’s not often worth it.

A property manager also understands the legal requirements of leasing a property to tenants. This has the potential to save you thousands of dollars as you can avoid a costly trip to the tribunal in the event of a dispute.

Your property manager can also provide guidance about insurance and ensure the home is maintained in the most cost-effective way possible. He or she will help you find reliable, long-term tenants who will save you from the stress and expense of constantly marketing the place to new people.

Looking for the best property managers in Perth? Get in touch today.