5 of the best ways to minimise your investment holding costs

“While the magnitude of expenses could be discouraging, especially to new investors, there are several ways to spread costs over time and ultimately minimise them,” Mr Needham said.

Here are his five best tips to reduce expenses:

1. Self-manage your properties

Choosing to manage your properties yourself instead of getting a professional’s help will eliminate services fees.

However, this strategy may require some adjustments to your time and budget, Mr Needham said.

“You will need to reserve funds for advertising the property each time it is vacated. You will also need to account for any lost income from your normal line of employment incurred as a result of managing issues with your property/tenants.”

2. Be on top of maintenance requirements

More than services fees, repairs and maintenance costs are some of the most difficult aspects of property ownership, Mr Needham said, because they are usually hard to anticipate and control. 

He highlighted the importance of knowing the property’s current condition before purchasing, as well as the insurance policies needed to be put in place to protect them from any tenant-related liabilities.

3. Review repayment terms and rental price

Mr Needham also suggested keeping yourself updated on repayment terms for loans and the rental prices based on market movements.

Being well informed about finance can help you offset losses by taking advantage of tax benefits.

“If the costs of holding your property exceed the amount of income it generates, claiming negative gearing tax benefits will go some way to offsetting this loss,” the analyst said.

“Negative gearing allows you to offset your property investment losses against your income, thereby reducing the amount of tax you owe.”

4. Be aware of common tax deductions

Common tax deductions, such as body corporate fees, borrowing and mortgage-related expenses as well as capital works costs can also help reduce your holding costs, Mr Needham said.

Advertising fees, cleaning costs, agent commission and management fees, accountant fees, postage costs, and stationary costs are also included in the list of the said deductions.

5. Know how investment structures work

You can also minimise the costs of holding an asset by choosing the right investment structure. According to Mr Needham, alternate structures involve varying fees and tax liabilities.

“For example, holding a property in a trust or through a self-managed super fund will incur different costs and deductions to holding a property in your own name,” the analyst said. 

Mr Needham encouraged keeping an updated budget that aligns expenses with the income being generated by the asset to avoid overcapitalising.