tax depreciation schedule

Commercial property renovation hacks that add value

As an investor, you want to be up-to-date with market trends and find ways to bring in tenants to your commercial properties. If they’ve sat bare for a couple of years, and looking dates, then it’s time to get renovating. We have a couple of hacks so you can focus on the right areas, where you can make the most money off your depreciation schedule.

Bathrooms

Not just any type of bathroom with a few toilet stalls and basins; looks definitely matter. Offices, shops and restaurants are becoming fancier with their designs. Even gyms have bathrooms worthy of an interior design featurette.

A gym shower and sauna in the USA

Bathrooms are major selling points for tenants in both residential and commercial property. Natural wood elements and lighting paired with neutral tiles is a common combination that never fails to impress. If you own an office block and have the room, fully equipped bathrooms are an excellent selling point. Workers often hit the gym before they make their way to the office. They’ll need a place to freshen up before the day ‘officially begins’.

Kids play area

Employees have families, as do potential visitors. And not everyone can bring in a babysitter or find a daycare. Having am on-site kids play area in a commercial property isn’t that unusual. Shopping centres have done it before, and the trend is slowly spreading to gyms and workplaces.

Kitchenette

Definitely a feature that will attract tenants. They need a place to keep their food, make their coffee and take a break from their desks. The kitchen is where you can make money in terms of the plant and equipment items in place there. This includes the dishwasher, espresso machine, microwave, sink and fittings.

Outdoor entertaining

Humans need sunlight and fresh air; what better way to access it at work than an outdoor area? When you’re renovating the property/making an extension, turn the extension into a patio with some hedges, a barbecue and some outdoor furniture. The barbecue and the furniture can be depreciated.

TVs

Yes, we are giving you an excuse to go out and buy some big screen televisions. Modern properties have a showreel on their TV screens, usually placed in the foyer and meeting rooms.

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Residential properties that guarantee an ROI

Depreciation And Real Estate Mistakes That Will Lose You Money

Mistakes are part of life, but you’ll be kicking yourself if they lose you money. Make sure you avoid the ones below.

Rent at mates rates

It’s natural to want to help your mates out; it’s what friends do. But there are some situations where mates rates should not apply, and that includes property. The reason investors get into the property market is because they want to make an income. Friends can certainly live in properties you own, but be firm when you say they must pay rent. You’re running a business, not a charity.

Don’t mix business with mates; you can’t be a friend and a land lord

Depreciation DIY

Don’t attempt this unless you’re a quantity surveyor. These people work out costings for building projects and have a high level of education. They’re part of an official body (Australian Institution of Quantity Surveyors) that ensures members are aware of the latest industry standards and participate in the training required to keep up their skillset.

Long story short; unless you have a Bachelor of Urban Development (Honours) (Quantity Surveying and Cost Engineering), leave it to the experts. Book an appointment here to get a qualified surveyor in for a visit.

Saying ‘that’s not worth anything’

Just because some of the properties have a few decades on them doesn’t mean they aren’t worthless. Some capital works are still eligible for deductions.

Items that are worth $300 or less are eligible for immediate deduction; think the rubbish bins, smoke alarms, children’s play equipment and the curtains. Other overlooked deductions include spa baths, bathroom and kitchen appliances and even the swimming pool are items that can be claimed on a tax depreciation schedule.

Old doesn’t equal worthess

Putting it in the wrong category

Yes, this is one of the dangers of DIY depreciation. In the schedules that quantity surveyors create, there’s two categories; capital works and plant and equipment. They’re also known as Divisions 43 and 40, respectively.

Capital works include items that are built into the property itself; wiring, driveways, fences and some landscaping. Plant and equipment include things you can easily remove from the property such as furniture and carpeting. If you own a commercial property the desks, blinds and shelves can be claimed. You can find out more about deductions on the ATO website.

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Common Errors Property Investors Should Avoid

Property Sector Warned About ATO Crackdown On Tax Depreciation Claims

Over recent years, the ATO has paid growing attention to tax returns submitted by tax payers relating to investment properties.

It is therefore highly likely that the Australian Taxation Office will pay particular attention to tax depreciation reports for investment properties when property investors submit their tax return from 1 July.

In particular, they may pay particular attention to tax depreciation reports that are prepared without a physical inspection of the property.

Unfortunately, a growing number of tax deprecation companies are not undertaking physical inspection of properties to cut costs and this failure could result in serious problems for their clients if they are audited.

If you are a property investor and plan to visit your tax accountant regarding your tax return from 1 July, you should raise the issue of tax depreciation and obtaining an ATO compliant tax depreciation schedule for your property or properties.

It is important to raise with your accountant the fact that desktop estimates of potential tax depreciation benefits are not accepted by the ATO and that a physical inspection of the property is required.

Accountants need to protect the interests of their clients by ensuring that the tax deprecation company they recommend to their client, conducts a physical inspection of the property.

The same principle applies to other professionals related to the property sector such as mortgage brokers who refer their clients to a tax deprecation company. Similarly, they should check if the tax deprecation company undertakes a physical inspection of the investment property before making a referral.

This is a simple check but one which could ensure that their client does not have to pay substantial penalty fees imposed by the ATO because the tax deprecation report is not compliant.

Overall, it is still unfortunate fact that a large number of tax payers who own investment properties will collectively miss out on millions of dollars in tax depreciation benefits over the coming weeks simply because they do not correctly claim them through lack of knowledge.

DEPPRO estimates that only one in five residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties.

Many property investors who have owned their properties for several years and have not undertaken a tax depreciation schedule still have the potential to claim back thousands of dollars in tax depreciation benefits.

A depreciation schedule can be undertaken at any time by a property investor. If you own a property for a number of years, you can still undertake a depreciation schedule and put in an adjusted tax return to enable them to obtain unclaimed tax depreciation benefits.

Most investors do not realize that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.

For a new apartment in a capital city, for example, this can equate to over $300,000 in possible tax benefits through depreciation.

You should engage the services of a tax deprecation company who will undertake an inspection of your property and provide you with an ATO compliant tax depreciation report which you can provide to your accountant.

This report is a ‘once off’ and will outline the amount of tax benefits you can claim on an annual basis. Anyone considering employing a tax depreciation company should ensure that they are a member of the Australian Institute of Quantity Surveyors (AIQS).

Obtaining a tax depreciation schedule that is compliant with ATO guidelines is a small investment that can deliver a huge financial return and boost cash flows during a time when rents throughout Australia are under downward pressure.

Want to Get Hired in Real Estate? Here’s What You Can Apply For

You don’t have to be a real estate agent to work in the property sector. Some people don’t like the publicity that comes with it. But there’s other avenues into the industry where you can build and oversee development projects, calculate expenses, or help clients on the legal side of buying their first property.

Real estate agent

You’ve seen their smiling faces on billboards, public seats, and on ‘for sale/rent/to lease’ signs outside buildings. These guys are on the front lines of the property industry, selling real estate and putting it up on the market. But don’t think it’s an easy job with a large salary that lets you buy that nice car. Real estate agents do twice as much work behind the scenes. They write reports for clients and the properties they manage, book inspections, and work with a legal team to make sure ownership transfers go smoothly.

Surprisingly, though, you don’t need a bachelor’s degree to work as a real estate agent. The minimum requirement is a Certificate IV in Property Services. Before you start selling, though, a license is required.

Quantity surveyor

A quantity surveyor is a person qualified to write a depreciation schedule. These guys will visit your property after you settle to assess the value of the plant and equipment items and capital works. The final report is sent 4 weeks after the visit.

Quantity surveyors also work on building projects. It’s their job to estimate the cost of the materials and provide a report to help with budgets. They’re also known as a construction cost manager. To become a quantity surveyor you must hold a university degree and register with the Australian Institute of Quantity Surveyors.

Property manager

This job comes with lots of power and responsibility. As described by SEEK Learning:

As a Property Manager, you will organise and manage the letting of commercial, residential or retail properties on behalf of their owners. You’ll liaise with tenants and owners, organise inspections and maintenance, and follow up unpaid rent.

You don’t need a bachelor’s degree unless you want to move up to higher level roles, like real estate development. The minimum requirement is a certificate in sales and property management, as well as registering with a state body.

property depreciation

More myths about real estate investing, busted

Horror stories about the real estate industry are numerous, yes. But this is because some investors and newcomers weren’t aware of the risks and/or have a low tolerance for them. They probably didn’t listen to expert advice, either. We’ll bust some more of the common myths out there, and maybe then your mind will be slightly more at ease.

  • It’s best to wait until I’m ready

This is a thought based on fear. You will miss more opportunities the longer you wait. That office space or single family home you had your eye on will get snapped up as well.

Waiting is certainly advisable if the conditions for buying aren’t right e.g. it’s not affordable or you can’t get another loan. It’s important though, to be aware if you’re making a logical decision or holding yourself back. When in doubt, speak to your financial planner or a mentor who has more experience in real estate.

  • Finding a tenant is going to be easy

Tenants are some of the pickiest people on the planet, and rightfully so. They’re choosing their future home or workspace. You must meet their idea of what they want their living or working space to look like.

You can rely on your realtor to market your property correctly. You can’t rely on ‘open houses’ to bring you a tenant; people might be genuinely interested but most visitors are passing through, picking off what they don’t like before they come across the right fit.

  • Young people can’t afford it

Yes, more horror stories. But people in their 20s have just as much buying potential as other investors. It’s a matter of how prepared they are. Sensible investors, new or experienced, listen to expert advice from the people who help them buy the property and manage their portfolio. This includes the financial planner, conveyancer, accountant, mortgage broker, and the property manager. There are also incentives, like government packages, that help first home buyers with their purchase.

Young people are investors, too

  • Debt is the worst

Your credit card debt is an example of this. But not all debt is made equal. You will have some amount of debt after purchasing your first piece of real estate but the rental income will slowly fill up the savings account.

Equity is also a way to buy your next property. This is the purchase price of the property minus how much you owe. This is an example of good debt. You can use the equity balance towards another property purchase.

Need more reading material? Look below:

Tax Depreciation Changes You Need To Know

Why You Should Focus on Improving Your Investment Property

10 Myths About Real Estate You Need To Stop Believing

Real estate is a tricky business and there’s a lot of articles out there telling you what you should and shouldn’t do. Some of them though, are fake news. Or at least news without the research to back up what they’re saying. Luckily for our customers, we know a few things about real estate and what myths you need to stop believing.

  • You can get rich quick

This only happens on reality television and those shows are giving new investors/aspiring renovators the wrong idea. Renovation and auction TV shows are highly publicised and the faces in the crowd are there for window dressing.

In reality, property investment, no matter your strategy, requires patience. If flipping houses is your game, the process is likely to take months instead of weeks. Real estate is about making calculated moves, not doing a rush job and slapping an expensive price tag on what you fixed up.

  • Agents are only interested in commission

It only takes a few bad experiences to spoil the reputation of a lot of good real estate agents. They aren’t just interested in their commission; they’re interested in helping you sell your house. They go to work every day because they love their job. The agents who drive shiny cars and wear nice suits have had a lot of experience and worked their way up the ladder.

  • Any property manager will do

This one will get a round of horrified looks. A good property manager isn’t easy to find. So don’t look at listings on Gumtree. Ask around and get recommendations. Other property investors are willing to tell you about good service when they experience it.

  • Inspections can be passed or failed

Not so. It’s an inspector’s job to go through the property and mark what’s good and what needs improving. If there are more crosses than ticks, you have a reason to be nervous.

  • Renovation before selling equals bigger profit

Age doesn’t justify total replacement unless your appliances are old and busted. Sometimes a coat of paint and new carpet is all you need. Real estate is more than a pretty facade; you must consider location and lifestyle as well.

  • CBD is the place to invest

This depends on who your ideal tenant is. People ideally want to live close to work, especially when the office is in the CBD. But will a family be looking for an inner-city apartment? Not likely. Will a mechanic set up shop in the city? Also not likely.

You must also think about rent. Prices are soaring, leaving office spaces and apartments empty. This burns a hole in property investor’s wallets. Regroup and rethink your strategy.

https://www.realestate.com.au/invest

  • My property price will only increase with time

Not necessarily. Real estate prices depend on market trends and demands from customers. If the market drops, so will the value of the property. And expensive price tags drive potential tenants away.

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Depreciation rules for your rental property | Articles from around the web

Why You Should Focus on Improving Your Investment Property

After a severe bout of comparison-itis, you realize your investment isn’t performing as well as the others in the area. But you hesitate at the thought of shelling out more money for the sake of a new carpet. You should focus on improving your investment property if you ever want results like the ones below.

You’ll get a better yield

In Real Estate’s invest section, there are two columns; growth and yield. This is a sensible first place to check when you’re scoping out a suburb’s earning potential.

To get the yield of your investment property, make this calculation: (weekly rent) X 52 weeks / (property value) x 100. This is gross yield before you pay any expenses. Net yield is what you earn after the fact.

You probably have a low yield because the property is dated and sitting empty. It’s hard to generate income with both of those speedbumps giving you trouble.

Your tenants are going to be happy

Tenants are picky people and for a good reason. They’re choosing a place to live/work, hopefully for a long time. If your office block or residence is dated, it’s time to spruce the place up. Fresh coats of paint, carpeting, and amenities like a dishwasher and aircon are all little changes that make a big difference.

Need inspiration? Check this out; https://www.homestolove.com.au/belle

Making improvements like these in your investment property will increase your chances of finding a tenant if you don’t have one. If you’re finding it difficult despite making improvements, think about the rules. It’s difficult, for example, for pet owners to find a home that accommodates animals. Consider making changes in the conditions and you’ll attract appreciative prospects.

They think of it as home, so put the effort in!

It helps your depreciation report

Plant and equipment, aka easily removable features, like furniture, fixtures, and appliances cannot be claimed unless you installed them yourself. This means you miss out on lots of earning potential. After renovations on your investment property, call the quantity surveyor for another inspection.

The property can finally compete

Hamptons, modular, Scandi-style; there are so many home trends to keep on top of. But by at least renovating the house or office will be on par with the others on the market.

Simple can be beautiful too

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10 Things We All Love – And Hate – About Investing in Property

Investing in property isn’t necessarily a hobby, though some see it way. Regardless of whether a person is in the sector to earn a little extra money or making a career out of it, there are things to love – and hate – about owning a portfolio.

  • Reliable income

Your homes and commercial blocks will always be there unless something extreme happens. Investing in property is often seen as a long-term, reliable investment, particularly when you have tenants.

  • Good homes

Property investors have their ears to the ground, and emails in their inboxes, about the latest commercial and residential pickings up for sale. Quality within the building itself is a must; the structure being up to code, curb appeal and a recent update to the capital works are signs of a good investment.

The home itself is one part; the neighbourhood is the other. Tenants, whether they’re a family wanting to put down roots or a business looking to set up shop, will look at the neighbourhood dynamic before deciding to sign anything. Access to public transport, shops, and air conditioning are only a few of the items on their checklist.

  • Turns negative to positive

You won’t make money straight away, but delayed gratification is a given when you’re investing in property. Negative gearing is when you’re spending more money on your portfolio than there are returns.

When you keep working on it though, the negative gearing will turn into positive cash flow. This happens in a number of ways; lowering interest rates, raising the rent, changing property managers and reducing certain expenses.

  • Rentvesting

Rentvesting = flexibility. You want to live in your dream suburb however, housing prices are on the expensive side. But you can still rent. You have flexibility instead of another mortgage but the luxury of living in a nice suburb.

  • Passion project

People don’t want to make a career out of investing in property but they genuinely love the market and browsing homes. Instead of investing some people will buy homes, renovate them and sell for a profit.

No difference between work and play

  • Competition

Now, where there’s a good property, there’s going to be five investors wanting it. Bidding wars happen and people miss out. This is why it’s better to be a strategist, not a romantic who buys with their heart.

  • Tenants

Property investors aren’t afraid to share stories about the horror tenants they’ve had over the years. Wild parties, drugs and extreme disrespect of the property e.g. cleanliness are some of the tamer complaints.

Problem tenants are easily weeded out by an experienced property manager. It saves the investors time and heartache (don’t be friends with your tenants).

  • Shoddy management

That being said, however, for every good property manager there’s plenty of bad ones. What does a sketchy property manager look like? Well, they advertise their services in an unpaid ad on Gumtree for one. They also don’t keep a regular inspection schedule or return your calls for days. Good management firms are often recommended by other investors. They will keep you updated and return your calls as soon as they can. Plus, all levels of staff in the office look happy to be at their job.

  • Capital gains tax

Ah yes, you can’t make a profit without conditions attached. If you sell your property for a profit, then you must pay CGT. It’s unavoidable, but certain conditions and discounts are available to lessen the sting.

  • Not quite liquid

Investing in property isn’t easy money. You won’t sell it for a quick profit. Good homes can spend days to months on the market. So dress it up nicely and make it a place where people want to live.

No such thing as easy money in the property market

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The amazing tax benefits from rental properties you probably forgot about

3 Reasons Why Your Property Investment Strategy Isn’t Working (And How To Fix Them)

Property investment is a business, it’s something people make a career out of. And they’re successful because they worked on a strategy. If your own isn’t generating some sort of flow, then it’s probably because you’ve made one or more of the below mistakes.

You haven’t educated yourself
Property investment strategies aren’t basic. They can be explained in simple terms but implementing them is anything but.Understand this: you can’t live off the income of one property alone. It won’t generate the income you desire. But a diverse portfolio of three or more will get you closer. Look at the different strategies out there and ask yourself a few questions, such as:

  • What is your risk tolerance?
  • Are you buying commercial, residential, or want a portfolio of mixed property types?
  • Is your aim for long-term growth or short-term return?

Real Estate’s guide to property investment strategies

Think as a business person, not a homeowner

You’re buying with your emotions
Remember, you’re buying properties for tenants, not your future family. Emotional investment leads to burnout and feeling jilted because you didn’t get that property you loved so much.

Find a mentor and start networking with the community. People in the industry are only too happy to share advice about a property investment strategy that’s worked for them. Ask them how they detached themselves from the homes or office blocks they were inspecting.

Another solution is to put yourself in a business person’s mindset. You’re running an enterprise, building your portfolio. If you act the part, everything else comes naturally.

There’s no team backing you
This is a big mistake new investors make. Creating an effective property investment strategy is NOT a DIY-type of project.

Successful investors have a team of professionals behind them not only to keep them grounded but also to keep them from losing all their hard work on a bad investment. You’ll need a savvy accountant to incorporate your strategy into your annual returns, a financial advisor to monitor your investments, a depreciation specialist to create a tax schedule and a property manager to handle general tasks around your portfolio. Asking for help isn’t a punch to your pride, it’s good sense.

Read this to increase the value of your commercial investment property

Those who foray into the commercial investment property sphere know the benefits it can bring. Longer tenancy agreements, high rental returns, and fewer expenses, as opposed to residential investments, are among some of the benefits. But if you’re interested in boosting the perceived value of your space to tenants, consider these.

Parking

This is a first-world problem that wastes worker’s time in the morning when all they want to do is get to the office on time.

Websites like Parkhound enable landlords to hire out car spaces. Undercover, on the street, and on a monthly basis. Including this in the rent will attract tenants looking for value and convenience.

Cleaning

Restaurants do it, offices do it, and you can do it as well. Nothing brings a smile to someone first thing in the morning and seeing the floors are freshly vacuumed and new trash bags in the bin.

When you’re doing up a contract with a cleaning company, make a list of items that need to be checked off with every visit. It can be something as simple as wiping down the desks or more detailed tasks like cleaning the fridge/microwave.

Appliances

If your commercial investment property is a cafe/restaurant space, adding high-end appliances will kill two birds with one stone. You’ll attract tenants who want the amenities, and you’ll get more from your tax depreciation schedule. Good quality appliances such as microwaves, ovens, espresso machines, and fridges will cost you a bit, but they’ll result in a nice tax return.

Light

Nobody works in shoe boxes or cubicles anymore. If you’re a landlord for a commercial office, highlight the open-plan space, including floor-to-ceiling windows. They don’t need to be that big, but easy access to natural light and placing desks near them will have the employees competing for ‘the best desk in the house’. Humans instinctively seek out nature, like sunlight. It’s known to boost employee well-being and all around satisfaction during the day.

Tech

We live in a connected world and humans are drawn to free wifi as much as natural light! Get several wifi routers, good aircon, a security system, and lots of outlets for future tenants to plug in their devices. Running out of battery is a 21st century nightmare.

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Depreciation rules for your rental property | Articles from around the web