Tax depreciation, property investment and our other greatest hits; 2017 in review

2017 was a year of rising property prices, people educating themselves about property investment, and a massive change in tax depreciation laws. We’ve collected some of the best articles that hit our news section in 2017 and bring them to you here.

 

The release of the 2017-18 Federal Budget sent investors into a tailspin, and for good reason. It doesn’t matter if you buy commercial properties or homes to let. These changes apply to everyone.

 

smashed avo and property invesment

It’s the debate that just won’t die! A scathing critique by property expert Tim Gurner about Millenial’s ability to save for their first home became a repeat headline over the year. Now smashed avocado is a tangible comparison to property prices. We even found a ‘luxuries’ calculator showing people how much a house deposit is equal to in yoga classes, trips abroad, and takeaway coffees.

 

When a mate tells you they invest in property, the likelihood is they’ll only have one or two items in their portfolio. Less than one percent of investors have diverse holdings of six or more assets. If you want to emulate the one percent, educate yourself here.

 

It’s common practice to buy a home, renovate it, sell for a profit and then repeat the cycle all over again. From curb appeal to the garage, we found 8 inspiring builds and overhauls to help your project along.

 

From an apartment block built for retirees in South Australia to a two bed, two bath home with a pool in the Northern Territory. We found properties from each state that you could snap up for half a million dollars or less (at the time the article was published).

 

Tax depreciation specialists, accountants, and property managers are part of your team when you get into the game. Use this article to give yourself a basic understanding about what a great manager should do before you go hiring that guy off Gumtree.

 

We support self-education:

Yield the most from your property portfolio

There’s two main strategies in the investment game: yield vs capital growth. They’re different, but the goal is the same: to make the investor money.

 

What is yield?

This is complicated for the new players in the investment game. Agents will speak about ‘yield’, the percentage of an asset’s market value. There’s gross yield (before expenses) and net yield (after expenses are deducted). Your Investment Property gives us the formula below:

Weekly rent x 52 / (value) x 100

The result is your annual return, or yield, of that property.

What is capital growth?

One common strategy in property is to buy the house, hold it as an investment for a period of time and then sell it for a higher price. The surplus is called ‘capital growth’. But this strategy isn’t for those looking to ‘get rich quick’. Capital growth occurs over a decade or more. In this time the area demographic changes thanks to developments. This includes land/apartment buildings, schools, and public transport.

As always, with whatever strategy you choose, make sure you listen to your advisors (accountant, property manager etc). They’re the experts for a reason.

 

Do your research

If you want capital growth, you might choose to buy in a satellite city or an up-and-coming suburb. Research trends in the areas you want to buy. These include:

  • Schools
  • Apartment/land development
  • Shopping centres
  • Retail outlets (cafes and boutiques)

Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?

Positive gearing

Positive gearing happens when you receive income from your tenants after paying maintenance fees. This type of investment gives you cash flow but the disadvantage is paying tax and a slow rate of capital growth.

But some investors will snap up positively geared properties to yield the benefits of the income. Because they’re earning money, it makes them more attractive to lenders. They have the potential to buy another home and grow their portfolio in a shorter period of time.

 

Plug the gaps

After you’ve done your research you’ll know that there’s rules and regulations that other landlords are imposing on tenants. What can you do differently? Your Investment Property did a survey asking tenants what they look for and the results show that:

  • 38% of tenants look for parking
  • 31% want cable internet connections
  • 32% look for pet-friendly properties (dogs are family too!)
  • 25% want a strong mobile connection
  • 22% check for an abundance of powerpoints

 

So after reading this, what would you do to build a strategy to yield the most from your portfolio? If you want more advice, read these articles:

  1. Residential properties that guarantee an ROI
  2. What $500,000 can buy you in the 2017 property market
  3. Rental property depreciation mistakes to avoid

Working as a quantity surveyor; their job in 4 points

“What do you do?”

“I’m a quantity surveyor.”

It’s common for blank stares to follow this statement. Quantity surveyors don’t get as much of the limelight as accountants, engineers, or architects but their job is a crucial part of any investor’s world. Here’s 10 more things to know about them.

 

  • They’re well educated

There’s a lot of work that goes into becoming a quantity surveyor, starting with going to university. For example, there’s a Bachelor’s of Urban Development with Honours (Quantity Surveying and Cost Engineering) from QUT. This course involves majors like urban planning, accountancy, and applied economics. There’s more to working as a quantity surveying than just good maths.

  • They’re quite worldly

This job allows people to travel. The construction industry needs quantity surveyors far and wide, especially during the initial stages of a project. Those who work for a company with offices abroad will find themselves on worksites from Hong Kong to Dubai. A quantity surveyor working for Deppro visits both regional and capital cities all around Australia at scheduled times of the year. So they definitely rack up the frequent flier miles.

Perks of the job? Qantas Club access!

 

  • Part of the group

To legally work as a QS, you need to become a member of the Australian Institute of Quantity Surveyors. This group represents all surveyors across Australia. Members are bound by a code of conduct to operate at a high standard. They have access to further education, professional executive events, and other resources.

Another institute both individuals and companies must register with is the Australian Tax Practitioners Board. This is especially the case when the quantity surveyor is working on calculating property depreciation. This way the tax depreciation schedule is fully ATO compliant.

 

  • More money, less tax

A quantity surveyor is also known as a cost estimator. Their job is to save money on the build without compromising quality. They’ll complete their job before the developers break ground and consult through the project.

Those who work on calculating depreciation, though, start their work when the buyer settles the home. After a walkthrough of the property, taking photographs, making notes, and inspecting plans, the quantity surveyor writes up a depreciation schedule. This sets out the lifespan of the fixtures in the property and how much value they’ll lose over time.

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

Confused about depreciation rules for your rental property? Did you even know there were rules in the first place? Depreciation, tax and claims processes are large and confusing mazes, so we gathered articles from around the web that make things crystal clear.

 

The One Depreciation Law Change You Absolutely Need To Know by Deppro

Investors who hold both commercial and residential properties were thrown for a loop in May 2017. Starting from July, the beginning of the new financial year, the Federal Budget came into effect with new depreciation rules. These rules affect what owners can claim which in turn claims how much they get back over time.

 

How Rental Property Depreciation Works by Investopedia

Investopedia is a useful website both novices and experts can refer to. The page linked above goes into the basics of depreciation such as how it’s calculated and when it ‘begins’. Hint: it’s not actually after the settlement date.

Make sure you’re square before the tenants move in

 

Top 10 tips to help rental property owners avoid common tax mistakes by the ATO

Rental property owners must navigate complicated tax rules. Not navigating them correctly leads to costly penalties. To help the common Australian investor, the ATO made a top 10 list of tax mistakes to avoid. These include what type of expenses to claim, as well as the right portion of costs and how to keep the right records.

If you need a printout to have on your nightstand, there’s a PDF available to download.

 

Claiming Depreciation on Investment Property: The property investor’s complicated friend by Investor Assist

This page is a one-stop-shop for investors wanting to know more about the process. There’s an uncomplicated list of depreciation rules, definitions and examples of what assets you can claim.

The page also describes the methods used to calculate depreciation costs, prime cost vs. diminishing value. But the quantity surveyor handles these calculations, not the investor. Once the values are worked out they go into the depreciation report. This crucial investment tool is recommended at the end of the page as the final step of claiming depreciation on an investment property.

Need more advice? Read these:

  1. Rentvesting: a forgotten way to own and rent at the same time
  2. Behave like a 1% investor with these tips

Residential properties that guarantee an ROI

Being selective about what you invest in, whether it’s commercial or residential properties, is a blessing. You invest wisely and earn enough to make your next purchase. When you’re shopping around, you already know the type of tenant you want to target.

 

Student accommodation

University and international students either live on-campus or in suburban properties close to their school. Residential properties like this need to be monitored closely so that nobody skips rent or causes damage. But in spite of the horror stories, the tenants are normally very well behaved.

You can rent out your properties as student accomodation

Student accommodation can take many forms. It can be a block of units, a single family home or even a townhouse. The home is ideal if it’s close to any given university or college campus and public transport.

 

Retirement living

These residential properties are often built by specialists and handled by a company with specialist experience (Aveo is an example). But on Real Estate, there’s some properties marketed as ‘retirement living’, geared towards investors.

Retirement homes are marketed to those who are over sixty but are by no means invalid. Residential properties on the market have high-end amenities and appliances included in the apartment or home. ‘Old’ doesn’t equal ‘dated’.

Mansion on the outside, retirement living inside

Retirees are good tenants because they respect their home and maintain it to the best of their ability. If they can’t, they’ll have a nurse or family member help them. If you’re looking at residential properties for retirees, it’s worth looking into these medical/nursing services and market them as optional amenities.

 

Single family homes

Small families will rent before they can afford their first home. Single family dwellings that are close to schools and shops are absolutely worth the investment and the fight that comes with trying to purchase one. Competition is fierce because other investors know there’s money to be made in this area of the market.

 

Need more advice? We have these for you…

  1. The great debate | Buy old property or build new?
  2. 6 signs of an amazing property manager

Rentvesting: a forgotten way to own and rent at once

You’re serious about getting into the investment game even though you don’t have a home in your own name. Fortunately, this isn’t an obstacle. Investing in property whilst renting at the same time, or ‘rentvesting’, made a splash early last year. It’s still going strong, despite getting less coverage in the headlines.

 

Why is rentvesting so popular?

There’s a number of things that make renting a more viable option among investors and people house-hunting in general.

 

Freedom: The word ‘mortgage’ scares the skin off lots of people and they can’t face the idea of juggling multiple home loans at once. It’s easier to sink their money and effort into their investment. Investors can give their full attention to the investment properties they own, like organising renovations, speaking with property managers, and organising depreciation inspections.

 

Postcode envy: So you can’t afford to own a home in that ‘happening’ and ‘ritzy’ suburb. But there’s enough in your budget to rent. You can rent where you want to live and then buy property in outlying suburbs. You can rent that fancy inner-city apartment but rent out a three-bedroom house to a family a few suburbs over.

Affording to live in the CBD area is enviable

 

Money: Investors who live in a rental home don’t have double the amount of taxes and duties that come with  owning an investment property and their own home. And there’s plenty of benefits that come with renting out a property for investment purposes. Tax deductions cover real estate advertising, some legal costs, and general maintenance. The amount of money earned back in tax depreciation will increase the longer the investor owns a property.

As a rentvestor you have more financial freedom

 

Rentvesting is a way for first-time investors to get on that first rung of the property ladder. Prices are increasing on the market but living the rental life has eliminated this affordability problem for some. Those who rentvest get the freedom, the bragging rights, and the money back that other property owners miss out on.

 

Need more advice? Read on…

  1. What $500,000 can buy you in the 2017 property market
  2. Don’t make these 6 mistakes if you want the best property investment possible

Millennials and Gen Y vs. The Housing Market | Articles from around the web

It’s a simple statement; young people simply can’t afford to buy a house in today’s market. Or can they? There’s a lot of layers to this statement made up of economics, investing habits and the trends of of the housing market. We’ve gathered articles from around the web to delve further into the issue. Can young people really not afford the Australian Dream? Or is it just more fake news?

Are Millennials Changing the Property Market? By Real Estate

They’re either lazy or savvy. Both adjectives are great headline fodder, but few are taking notice that Millennials are driving change in the property market. The differences are obvious, from how young people save right up to how they buy.

10 tips to become a Gen Y Property Guru by Real Estate

This is a good article for younger people wanting to know how to even get started in the property market. Homes and ‘abandoned shacks’ in Sydney are selling for millions, intimidating the next generation out of the game. But it doesn’t have to be that way if you play smart.

 

The best suburbs for Millennials to buy property by Domain

Compromise isn’t a word people like to hear when they really want something. It’s necessary though, if the younger generation wants to enter the property market. Buying in a capital city mightn’t be an option,

 

Home buying in 1982 vs 2016 by The Telegraph UK

The younger generation still desire to own a property. Surveys done have placed this goal above a successful career or having a family. The desires are the same but the gap on how fast it can be achieved has widened substantially, as reported by The Telegraph.

 

Property and income widens the generational divide by Newscorp

Competition from wealthy investors, less earning potential and rising property prices are just some of the challenges the young ones face.

 

Need more advice? We have it here…

  1. Seven Golden Rules when Buying a House and land Package for Investment Purposes
  2. The great debate: 5 articles about smashed avo vs property investment

Ideal tenants for a commercial property

Commercial property is a lucrative investment if you have the right tenant. Early on in your property investment planning, you should’ve given thought to who you want in your space. If you’re just starting out, this can act as a handy reference.

 

Coworking space agency

There’s more gig-workers, digital nomads, and freelancers than ever before. They all need a space to work, so why not make yours the best place?

 

Normally they won’t lease the space through you. This is done by the coworking space agency renting the building. If you’re creating a commercial property from the ground up, make sure your design includes a combination of areas than can be used as board rooms alongside open-plan working spaces.

When you’re shopping around for a new property, location is the biggest factor. You’re more likely to get a tenant like this if you purchase an inner-city location, close to public transport. New laws mean you can only depreciate the plant & equipment you install yourself. If the commercial property needs some ‘fixing’, like new taps and lights, you can deduct these without any trouble.

 

Restaurant/bakery/cafe

This tenant is always going to return a good rental profit when they find the right location. Restaurants, bakeries, and cafes are everywhere, both in CBD and suburban areas.

Cafe’s where people can work or relax with a coffee and croissant are always welcome

A commercial property like this will need up-to-date plant and equipment. You can install these yourself and claim the deductions over time. This includes ovens, stoves, refrigeration, and even the taps. If you’re lucky, a well-known cafe will need to open a second location and you’ll happen to have the perfect property ready to lease.

 

Retail boutique

These ones are trickier to lease and it’s best left to your property manager. Their screening process ensures the potential tenant is suitable to lease the space.

Retail is very competitive and some small businesses do struggle. But those who thrive will either open a second location to keep up with demand, or shop around for a larger space.

 

Media agency

A small or mid-tier media agency, like marketing, will definitely treat your commercial property with respect. It’s their ‘home’ and a place for them to host clients of their own. The property manager will interview them to make sure their level of income is suitable to keep up with the rent.

To attract a tenant like this, it’s good to keep the office space to bare basics. The tent will dress it up themselves. It’s also ideal to have a cordoned-off ‘boardroom’ space for private meetings.

 

Need more advice? Read on…

  1. 6 signs of an amazing property manager
  2. 5 ways to find the best property investment

The great debate | Buy old property or build new?

Are you holding out for a heritage home? Or would you rather build a house that pays homage to era’s past with heritage ‘features’? We’ve gathered articles around the web that compare the pros and cons of buying vs. building for investment purposes.

 

Buying a house vs. building a house by CanStar

property

Banking, insurance, and investing are all part of CanStar’s services. It’s natural they’d write something about property investment and the associated costs. They look at both sides equally, listing the pros and cons of each. This is frustrating to those who want a simple ‘yes or no’ answer but their advice is not to be taken for granted

Building your home vs. buying: What to know before you decide by Domain

Domain interviewed several experts in the property field about this topic. A buyer’s agent, realtor, builder, and lecturer all have their say. Ultimately though? It depends on  the investor and their priorities.

 

Building your own Investment Property from Scratch by Your Investment Property

This article is written by Lindy Lear, a successful investor who built a portfolio of eight properties in three years. She takes readers through the process of building a home for investment purposes. This starts with choosing a property and ends with the amount of the (many) tax benefits the reader can claim if they follow through on their plans.

 

The big match up: buying old or buying new by Your Investment Property

Your Investment Property pits an investment strategist against a new homes developer in the debate. Both sides have valid points, some of which you mightn’t have thought of.

 

Is Buying A House or Building a Home a Better Investment? By Home Together

 

Home Together asks the questions the investor’s need to answer so they can decide what’s best for them. There’s even a downloadable checklist included!

 

Need more advice? Read on…

  1. 8 amazing home builds and overhauls from around the web to inspire your investment property renovation
  2. 4 articles that give investors a reality check about the property market, worldwide
  3. What NOT to do before and after getting your property report

6 signs of an amazing property manager

When you purchase an investment property you can’t shoulder the burden of managing it yourself. Investors regularly pass this duty on to their property managers. Of course there’s a few ‘unreputable’ characters out there, but the professionals are worth their weight in gold (or rental profits!).

When you’re comparing agencies and individuals, make sure you’re noting down these five points:

 

Their vacancy rates
As in, they’re minimal. Good property management equals low vacancy rates. Your property won’t lack for tenants because the manager has done their job properly.

Senior management aren’t afraid to be hand-on with the work and that’s another reason why some firms are so successful. The more experienced people are still in the game, doing their best for their clients.

 

They have a network of services
Yes, the manager’s main job is to MAINTAIN your properties and make sure the rent is getting paid. But they should offer more than just this basic service. A good firm will also check the market to make sure rent is fair. They’ll calculate invoices for you. There’s a network of trades on speed-dial when something has to get repaired. In short, you don’t have to lift a finger, because your property manager should be taking on most of the responsibility.

Got a property problem? They have someone to fix it.

The door’s always open
Irregular communication is a red flag. Property managers must call their clients regularly with updates about the homes and spaces they’re responsible for. It doesn’t matter if the news is bad. Transparency is key. Plus, when the client calls, they’ll always answer unless there’s an emergency.

 

They come highly recommended
If an investor is happy with their team, of course they’ll spread the word and recommend them. Investors reach out to each other regularly for advice about who to hire and what market actions to take.

If you know an investor with a good portfolio who seems to be sailing along with a big smile on their face, ask them who manages their properties. Alternatively, you can do a Google search and look at recent My Business reviews.

 

Everyone’s happy
If people in the property management firm look like they’d rather be somewhere else, it’s best to walk right out the door again and not take the meeting. If staff are happy and content in their job, they’re going to do their best for YOU too.

 

Genuinely happy staff will care more about your investments

 

The firm is a well-oiled machine
Your property manager should have a regimented schedule that encompasses everything they do. Inspections are a regular occurrence alongside rent payments and client meetings.

 

Liked this? We have more advice to share…

  1. The one depreciation law change you absolutely need to know
  2. The great debate: smashed avo vs. property investment
  3. Behave like a 1% investor with these tips