Forums / Property Investing / Help Needed! / Understanding water fees

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  • Profile photo of TMTM
    Participant
    @tmaj
    Join Date: 2015
    Post Count: 13

    Hi guys. Im new to investing and just trying to work out all the fees that you need to consider when buying property. Im trying to work out whether certain properties are positively or negatively geared. As a first time investor I am looking at regional markets to try and get a property that can increase my income.

    Obviously the only income of the property is through the rent and so I am comparing that to the expenses.
    The expenses I am factoring in are the mortgage repayments, property management fees of 6%, rates, loan fees, insurance,water, maintenance and body corporate if it is a unit.
    When comparing houses to units I realise that the house will not have the body corporate fees. The thing that confuses me though is water.
    Looking online I’ve noticed that water can be quite a big expensive when you buy a unit. Are you expected to pay the water bill on all units you buy?
    When you buy a house is this cost not there and gets passed on to the tenants? I remember when I rented as a student we had to pay the water bill.
    I find this whole water situation very confusing so would appreciate any advice.

    Also are there any other costs in either situation that I should be factoring in. Its quite daunting trying to invest for the first time and thats why I want to go with a cheaper regional property that is cash flow positive. From there once I have a bit more first hand experience with how much everything costs I hope to build my confidence and make some further investments

    Profile photo of DeanCollinsDeanCollins
    Participant
    @deancollins
    Join Date: 2015
    Post Count: 376

    we pay the water for our two investment properties in Sydney (and I think that there is something in the NSW rental rules that says you cant pass this on to tenants – feel free to correct me if this is wrong).

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Any other fees charged by the property managers are also claimable, such as letting fees and advertising fees.

    You’ll be stuck with the service charge portion of the water bill. As to the water usage, it depends both on the state, and whether the dwelling has its own water meter. eg in Victoria, if the dwelling has its own water meter, the tenant pays ALL the water usage, unless the tenancy agreement specifies otherwise. However if it was a unit in a complex that had only one meter shared between everyone, then you cannot pass the water usage on to the tenant and you would be stuck with it. In QLD there are a few ways of passing on some or all the water usage, but if passing all usage on, you have to have all the wiz bang water saving devices. It is easiest to chat to a property manager in the area you are thinking of buying and just ask them how it works. However water usage itself isn’t a huge fee so doesn’t affect the bottom line all that much.

    Don’t forget depreciation. You can tax deduct the cost of getting the schedule created, and then there is the year on year deduction as per figures on the depreciation schedule.

    Factor in an amount for annual maintenance costs (a popular figure seems to be 3% of the rental income) and be aware you could end up with a vacancy if your tenant vacates and the new tenant doesn’t move in precisely on the next day. If you budget for perhaps a 2week vacancy and find you could not sustain such a vacancy, then perhaps buying a property wouldn’t be such a good idea. There should always be a slushy fund to cover periods of vacancy or unexpected maintenance costs. A common slushy fund figure is $5k.

    Hmm what else. Other bank fees such as annual package fees regarding the mortgage is a common fee too.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    As mentioned it varies from state to state.

    In NSW you can pass on the usage bit if the property has it’s own meter.

    Lots of people avoid units/villas/townhouses because of the extra cost of strata.

    but if you factor in that you can save $10000 on insurance sometimes the extra cost isn’t that much. Yields are sometimes higher for units etc also to compensate for that. You need to do your research on BC fees. Some are VERY high. I’d avoid those (pools and lifts add extra costs). I wouldn’t not buy because of the water charges though. The actual water charge bit is not usually the major part of the bill (for units anyway).

    Profile photo of JoJo
    Participant
    @jodyt
    Join Date: 2015
    Post Count: 23

    I have properties where we pay the water and other properties where the cost is passed on to the tenant. One problem I have found where the tenant pays the water is that they will complain about every single little drippy tap because they think it is costing them a fortune in water – in reality it may be costing only cents in extra water bill, but it is costing me hundreds in plumbers bills.

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