The 10 biggest costs of real estate investment
Data from the Australian Taxation Office revealed the hidden expenses of owning an investment property are significant
2 min
New tax data reveals the 10 largest holding costs that landlords pay to maintain their real estate investments. While the biggest expense is an obvious one – interest on loans – the next biggest cost categories may be surprising. The second biggest expense was council rates and the third greatest cost was the fees landlords pay their property managers to collect the rent and organise repairs.
The Australian Taxation Office documents all 19 cost categories of real estate investment in the latest round of annual tax data just released for the 2022 financial year. Two of the cost categories are depreciation expenses, which do not come out of pocket but can be claimed by landlords as capital works and capital allowances to reduce their taxable income.
Landlords paid $15.76 billion in interest on their loans in FY22, along with $3.94 billion in council rates and $3.30 billion in property management fees. Property management is typically charged as a percentage of monthly rent, with other fees such as new tenancy agreements added on top.
Repairs and maintenance was the next biggest cost category with $3.19 billion shelled out to rectify issues. The fifth largest expense was body corporate fees at $3.12 billion. Body corporate fees are paid by landlords who own strata-title investment properties, such as apartments and townhouses.
The sixth biggest expense was insurance at $1.99 billion. Insurance costs may include protection against damage to the building as well as landlords’ insurance to cover rent defaults and contents. Landlords also paid $1.72 billion for water and sewerage services, with tenants in some parts of Australia like Queensland and Western Australia required to chip in to cover their water usage.
Land tax was next with $1.64 billion paid by landlords whose properties exceeded certain land values prescribed by their state or territory governments. Land tax has been a hot topic in Victoria in 2024 after the state government slashed the tax-free threshold from $300,000 to $50,000 from 1 January. The final two costs among the top 10 real estate investment expenses were $1.19 billion paid out to cover sundry expenses and $381.39 million for professional cleaning services.
In FY22, there were 2,268,161 landlords who owned investments either solely or jointly. This was one percent higher than in FY21 or the equivalent of 22,600 new landlords. FY22 was only the second year in more than two decades that a majority of landlords were cash flow neutral or positive instead of negatively geared. This was due to record low interest rates.
The official cash rate remained at an emergency low for the first 10 months of FY22, with the cheapest interest-only investment variable rates being about 2.5 percent at the time. Today, the cheapest interest-only variable rates are closer to seven percent, according to RateCity.
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An ultra-luxury Main Beach penthouse with 360-degree views of the beach, hinterland and city skyline has hit the market with an $18 million price tag, as buyers seeking a rare slice of coastal opulence continue to drive the top-end of the Gold Coast market.
The sprawling 600sqm residence will occupy the upper two floors of the 29-level La Mer tower on Main Beach Parade, and has been released as its construction reaches top-out, ahead of completion later this year.
The lavish penthouse boasts four bedrooms, all with ensuites, including an ocean-facing master retreat with private lounge, a kitchen designed for a private chef, a rooftop pool, huge entertaining zone with outdoor kitchen, a grand staircase, and its own express lift.
Demand for high-end Gold Coast property remains strong, with a Burleigh penthouse sold off-the-plan for $30 million earlier this year, surpassing the $24 million record set in 2023.
“The La Mer penthouse represents exceptional value, considering its quality design, size, privacy and location – not to mention the 360-degree views capturing the beach and Gold Coast Broadwater,” said OTP Group director James Elliott, who is marketing the project.
“We’re anticipating interest from high-net worth individuals and couples seeking a residence or holiday home in the sought-after village enclave of Main Beach, taking advantage of the unprecedented growth underway in the area and neighbouring The Spit.”
The $155 million La Mer is being developed by developer-builder ODUS and Nazero, in partnership with funder Metrics Credit Partners.
ODUS Director Byron Sakha said with construction powering ahead and the 29-level structure now complete, it was the ideal time to launch the penthouse to the market.
“We’ve worked with internationally-recognised studio, Sici Design, on the penthouse interiors, with a focus on ensuring it isn’t luxury for luxury’s sake – every element has been thoughtfully designed to enhance quality of life for those who call it home,” he said.
“The views are the hero of virtually every space, but we’ve given equal attention to the fittings and finishes, so every detail exudes elegance and refinement.
“Now that construction of La Mer has topped out, prospective buyers can experience how the building is taking shape and the exceptional location on offer, just 68 steps from the sand.”
Sici Design founder and director Maria Papadopoulos said the penthouse interiors exemplified effortless luxury living.
“The views weren’t something we designed around, they became part of the design itself, with the true luxury of La Mer in its feeling of peace, calm and wellbeing,” she said.
“Luxury isn’t defined by how something looks, but how it makes you feel, and we believe a luxurious home should be beautiful to live in, not stressful to maintain.”
Refined yet durable materials include premium natural stone Austral Dream Dolomite, with travertine bringing warmth and timelessness, complementing timber flooring, and a coastal colour palette.
The ocean-facing resort-style master retreat occupies half the upper level, with its own private balcony, lounge room, two walk-in wardrobes, and an oversized ensuite with double shower, double vanity, and solid stone freestanding bath overlooking the views.
The kitchen features a 3.6-metre statement island bench and expansive butler’s pantry, complemented by a dedicated wine cellar and integrated bar area.
Designed by architects, Plus Studio, La Mer features 24 full-floor, three-bedroom plus multipurpose room residences, along with the dual-level penthouse. Exclusive resort-style facilities include a pool, spa, fully-equipped gym, sauna, barbeque facilities, private sun lounges, yoga lawn and an outdoor beach shower.
The penthouse is being launched as part of the final release of apartments at La Mer, with prices starting from $4.3 million.
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