Taking out insurance for your real estate property is a very important thing to organise upon settlement. These insurances protect your building and contents against damage.
There are a few different types of insurances. Thes include:
Building and contents insurance: For an owner-occupied property, insurance of both the building and contents can be covered under one insurance policy. This form of policy provides cover for loss or damage to your building, which may be caused by things like fires, storms and theft. It also covers your personal contents within the property such as carpets, furnishings and personal belongings.
Landlord insurance: This policy provides cover for the building, contents or both. As highlighted by the title, this insurance is most popular with landlords for their investment property. This insurance policy covers your building from damage from events like storm, fire or flood. You can also cover the rental income loss if your investment property becomes unliveable due to these events. Most insurance companies offer additional cover to protect against specific events caused by your tenants, such as accidental or intentional damage of the building.
Standalone building insurance: Standalone building insurance provides cover for damage to your property by natural events such as storms, fire or floods. This type of insurance often covers external structures like a pool, but won’t cover your personal belongings.
Standalone contents insurance: This insurance covers your personal belongings within the property, such as furniture, clothing, artwork, jewellery and electronics while they are at your home. However, this policy will not cover damage to the building itself.
Insurance policies can have different benefits and exclusions depending on your chosen insurance provider. Therefore, it is important to research different policies available, and choose the one that is most suitable for your needs.
Example: Investment property costs
To give you more of an accurate idea of what you may expect in terms of investment property costs, we’ve utilised this case study from Commonwealth Bank.
Georgina is buying her first investment property in a suburb of Brisbane. It’s a 3 bedroom, 2-bathroom townhouse in West End, and the property is listed for sale at $750,000.
Georgina’s upfront investment property costs are:
Deposit: $160,000
Building and pest inspection: $349
Stamp duty: $29,274
Legal fees: $1,800
Mortgage registration fee: $195 (included in stamp duty)
Total upfront cost: $191,423
Georgina’s ongoing investment property costs are:
Loan repayments: $1,134/month
Land tax: $2,000/year
Insurance: $349.50
Maintenance and pest control: $170/month (average)
Property management: $30/week (plus GST)
Council rates: $1,001.72/year
Body corporate fees: $100/week
Tax accountant: $90/year
Total annual cost: $25,489.22
This simple case study gives you an appreciation and understanding of the added costs that come with purchasing real estate. So, when you think you have just enough money for a house deposit, take these factors into consideration when making your decision.