The real costs of buying an investment property

The deposit is the number everyone plans for. It's rarely the only big cost. Stamp duty, lenders mortgage insurance, legal fees and inspections can add tens of thousands of dollars before you get the keys — and the costs of holding the property start the day you settle.

This guide walks through every cost, what drives it, and how each one is treated for tax.

Costs to buy

Stamp duty

Stamp duty — called transfer duty or land transfer duty in some states — is a state government tax on buying property. For most investors it's the largest cost after the deposit.

• It's set by the state or territory the property is in, and rises with the price.
• Investors generally don't get first home buyer concessions, which are designed for people buying a home to live in.
• Some states charge extra duty for foreign buyers.

Use your state revenue office's calculator for the actual figure — see the sources below. Rates change, and small differences in price can move you into a different bracket.

Tax treatment: not deductible. Stamp duty on the purchase forms part of the property's cost base, which reduces your capital gain when you sell.

Lenders mortgage insurance (LMI)

If you borrow more than about 80% of the property's value, most lenders charge LMI. It protects the lender, not you, if you default. Moneysmart notes a 20% deposit generally avoids it.

• The premium rises steeply as you borrow a higher share of the value.
• It can often be added to the loan, but then you pay interest on it too.
• Using equity in your home for the deposit is one way investors avoid LMI. See how to use equity.

Tax treatment: on an investment loan, the ATO treats LMI as a borrowing expense, claimed over 5 years.

Conveyancing and legal fees

A conveyancer or solicitor reviews the contract, runs the searches and handles settlement.

Tax treatment: part of the cost base.

Inspections

• Building and pest inspection for a house
• Strata report for an apartment or townhouse — check the sinking fund, special levies and any defects

Skipping these to save a few hundred dollars is one of the most expensive mistakes investors make.

Tax treatment: generally part of the cost base.

Loan costs

Application and establishment fees, valuation fees, mortgage broker fees charged to you, and the government fee to register the mortgage.

Tax treatment: on an investment loan, these are borrowing expenses, claimed over 5 years — or all at once if they total $100 or less.

Other settlement costs

• the government fee to register the transfer of title
• adjustments for council rates, water rates and strata levies the seller has already prepaid
• building or landlord insurance, which usually has to be in place from settlement or exchange

A budget for the purchase

We haven't filled in the stamp duty, because it varies so much by state and price that any single number would mislead. It's usually large enough that it — not the deposit — is what stretches the budget.

Costs to hold

Once you own the property, the running costs begin. Moneysmart's list:

• loan interest — usually the biggest
• council and water rates
• building and landlord insurance
• strata or owners corporation fees
• land tax, charged by most states on investment land above a threshold
• property management fees, if you use an agent
• repairs and maintenance

And the ones people forget:

• letting fees and advertising each time you find a new tenant
• vacancy — weeks with no rent at all
• compliance costs, such as smoke alarm servicing, which vary by state
• an accountant and a tax depreciation schedule from a quantity surveyor

Tax treatment: most holding costs are deductible against rental income in the year you pay them. See what you can and can't claim.

From 1 July 2027, if you bought an established property after 12 May 2026 and those costs exceed the rent, the loss can't reduce the tax on your wages — it's carried forward. Budget to fund any shortfall yourself. See negative gearing after the 2026 Budget.

Costs to sell

• agent's commission and marketing
• legal and conveyancing fees
• capital gains tax on the profit

Tax treatment: selling costs reduce your capital gain. See capital gains tax: the 2027 changes.

Keep a cash buffer

Every investment property eventually has a month where the tenant leaves, the hot water system fails and rates rise, all at once. A cash buffer — kept in an offset account on your home loan, where it also saves interest — is what stops that month becoming a forced sale.

How big depends on the property and your income. A common approach is enough to cover several months of the property's full holding costs with no rent coming in.

Questions to ask before you commit

1. What is the stamp duty on this property, in this state, at this price?
2. Will I pay LMI, and is avoiding it worth waiting for?
3. What does the building and pest inspection or strata report say?
4. What will this property cost me each week to hold, before any tax benefit?
5. Do I have a buffer for vacancy and repairs after all the purchase costs are paid?