What does it cost to buy and hold an investment property in Australia?
An investment property costs more than its price. When you buy, you pay the deposit, stamp duty, legal and loan costs, inspections and any buyer's agent fee. Each year you then pay interest, rates, insurance, repairs and management, and sometimes strata levies and land tax. Tax treats each type of cost in its own way.
By Ankit PaliwalUpdated
What do you pay when you buy?
The deposit is the biggest cheque, but it is part of the price. On top of it, you pay transfer duty, often called stamp duty, to the state. Each state sets its own rates and offers an online calculator. Foreign buyers may pay an extra surcharge. There are also fees to register the transfer and the mortgage.
Then come the service costs. Expect a conveyancer or solicitor, a building and pest inspection and, for a unit, a strata report. Your lender may charge an application fee and a valuation fee. Lenders generally charge LMI when you borrow more than 80% of the property value. LMI stands for lenders mortgage insurance. A buyer's agent fee, if you use one, also falls here.
What do you pay each year?
The loan is usually the largest yearly cost. Interest is one part, and principal is another if you pay it down. Then there are council rates, water charges, landlord insurance and building insurance. For a unit, strata levies usually cover building insurance and shared areas.
A property manager charges a fee, often a share of the rent, plus letting fees. Repairs and upkeep come up without warning. Land tax applies in most states once the land value you own passes a set amount. In NSW the 2026 tax-free threshold is $1,075,000. In Victoria it is $50,000.
How does tax treat each type of cost?
The ATO splits costs into groups. Stamp duty on the purchase is a capital cost, so it is not deductible. It goes into the cost base used for capital gains tax when you sell. Fees to a buyer's agent, conveyancer and other advisers on the purchase are treated the same way.
Borrowing costs are claimed over 5 years, or over the loan term if that is shorter. These include lenders mortgage insurance, loan set-up fees, a lender's valuation and stamp duty on the mortgage. If they total $100 or less, you claim them in the same year. Interest and running costs can be claimed each year while the property is rented or truly available to rent. Loan principal cannot be claimed.
| Cost | When you pay it | Usual tax treatment for a rental |
|---|---|---|
| Stamp duty on the purchase | At or before settlement | Not deductible; added to the cost base |
| Conveyancing and buyer's agent fees | At purchase | Not deductible; added to the cost base |
| Lenders mortgage insurance and loan fees | When the loan is set up | Borrowing expense, claimed over 5 years |
| Loan interest | Every repayment | Deductible while the property earns rent |
| Rates, insurance, management, repairs | Each year or as needed | Generally deductible in the year paid |
| Loan principal | Every repayment | Not deductible |
A cash budget for the day you buy
- Price $600,000 with a 20% deposit: 0.2 x 600,000 = $120,000.
- Assume stamp duty of $22,000. Use your state's calculator for the real figure.
- Add legal costs of $2,000, inspections of $700 and loan costs of $1,200: 2,000 + 700 + 1,200 = $3,900.
- Cash needed: 120,000 + 22,000 + 3,900 = $145,900, before any buyer's agent fee or cash buffer.
Spreading borrowing costs over 5 years
- Assume borrowing costs of $1,500: a $600 set-up fee, a $400 valuation and $500 of other lender charges.
- The total is more than $100, so it is spread over 5 years: 1,500 / 5 = $300 a year.
- If the loan term is shorter than 5 years, spread it over the loan term instead.
- In the first year, the claim is reduced to match the days you held the loan.
For investors
The true budget starts before the offer.
Many buyers set a budget around the price and the deposit. The real limit is the price plus every buying cost, plus a buffer for the first year of holding costs. Write that budget before you make an offer. It tells you the highest price you can pay without running short at settlement or in the first quiet month.
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