28th August 2017
What are the elements of the cost of investment?
When I was thinking of investing, when I was young and naïve, my first investment property at Ryde, I thought how much it cost to invest in a property was the ADVERTISED price. I was very wrong! Was I wrong!
Glad I had extra savings in the bank back then.
I still remember, my first investment property, I read in the newspaper, yes, we still very much use newspaper to find properties, now it is all internet. I saw a lovely apartment for my budget, it says $110,000 for a one bedroom apartment.
I went to see the apartment, loved it and haggled down to $101,500.00
I thougut I was good, to bring the cost of investment down and only have to pay $101,500.00 for my first investment, if I would have kept it, it would have been $450,000 now!
Off the track, but the cost of investment is NOT just 101,500 which I sold for 150,000 because I needed the money back in 2001 to save me from my own business mis-venture, property is a life saver when we do mistakes in life. Mistakes happens in our life journey, learn to have a back up life saving plan, properties are excellent life savers!
The cost is NOT 101,500, it has extra cost involved.
It ended up for me, to be about 125,000, that’s a whopping 23% extra!!!
By the way, when you sell, there are also EXTRA costs, which you will find out as an investor! I was caught in it, the Tax Department charges me another 20% after the sale!!! Investment is NOT cheap, you really need to do your research else you end up NOT really investment. That’s another story, for now…
When you invest, remember to ADD the extra costs attached, they are:
For my first investment, I was very gullible and costly, I had to PAY outstanding strata and rates because I did not read the contract of sale. I use their SOLICITOR on advice of the real estate agent, he says, “It is the same anyway, you get to save money, just use the seller’s solicitor”. Sounds good but USE YOUR OWN solicitor to protect your own interest, even when you are low on money, they will save you even MORE, with hidden expenses which your own solicitor will SEE and bring your awareness to. REMEMBER TO READ the contract of sale, sometimes you have ADDITIONAL that you did not expect, for me, it was the OUTSTANDING the previous owner DID NOT PAY beacues they are selling the place, it WAS in the contract! I did not have my own solicitor.
The normal and usual COSTS involved in the cost of investment are items 1 to 7.
When you want to calculate your GROSS or NET yield, you want to INCLUDE all the above as you COST OF INVESTMENT.
Don’t be a silly investor like me before, make sure you have ENOUGH money in bank to account for the EXTRAS, else I could have been forced to resell the property before the investment even started.
Remember, your FIRST investment property, you will be EXCITED, when that happens, you will NOT THINK much because you loved the property so much, you may be overwhelmed and you will get caught off guard with some stuff, be calm, be very calm, think it through, plan it through.
Plan your finance when you are going for an investment property, get your COST of investment clear before you jump in with both feet!
Licence Real Estate Agent (LREA)
Oracodes Realty Pty Ltd
Licence Real Estate Agent in NSW.