Live/work space; a niche going through a revival

Business owners living above their shops is nothing new. From Europe to Asia, the likes of butchers, leather goods workers, and produce sellers have lived in apartments above their businesses. Australia is catching on (again), and work/live/play spaces are once again on the rise.

 

Why so slow on the uptake?

Zoning is the major issue. One roadblock that stops business owners from living above their workspace is that their business property is in a commercial zone, not a residential one.

In Australia, there are four major zones: commercial, residential, industrial, and agricultural. There are subzones within each category. The live/work way of life was a lot simpler before zoning laws came into the mix. But it can be done, as seen in the example below.

 

Habitat

Byron Bay is known for its creative spirit. It’s the home of artists, designers, chefs, and those who have turned their craft into a living. Rather than commute to work, Habitat offers established businesses and start-ups the opportunity to live and work within walking distance. In this case, right downstairs.

Developer Brendan Saul saw the gap for an affordable, sustainable live and work space. Habitat was inundated with enquiries and officially opened its doors in late 2017 and hosts the likes of florists, clothing retailers, cafes, restaurants, and gyms. It opened a communal workspace in 2018.

It is possible

Governments have also gotten on the live/work trend, providing affordable living spaces for creatives and entrepreneurs wanting to take risks.

When you decide to take the plunge and invest in a live/work space, make sure you reach out to a professional. Brokers and real estate agents will have the zoning knowledge and will guide you through the process of building your own space, if you so desire, to lease.

 

Get more advice below:

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The amazing tax benefits from rental properties you probably forgot about

Thinking about tax is much more fun when you’re thinking about tax benefits. Property investment is a tricky game to play, but smart investors reap the rewards when they remember to claim on the below items.

 

Tax depreciation

The tested-and-true method, and Deppro’s speciality. Getting a tax depreciation schedule ASAP is a guaranteed way of earning back the money from your portfolio. It’s one of few tax benefits that doesn’t discriminate.

It’s best for the quantity surveyor to do their inspection before the tenants move in. When the investor does renovations, they’re obliged under ATO law to tell the surveyor how much was spent. Measures like this make sure that the maximum benefits are awarded.

The depreciation fee is a tax benefit; it’s fully deductible!

Capital gains tax

Yes, there are some benefits to capital gains tax, particularly thanks to the exemptions available!

It’s not available to your entire property portfolio, typically the exemptions apply to the home you actually live in. You can get a full exemption if you live in the home for at least 6 months after buying and can prove it’s your primary residence.

Another full exemption is possible if you own the home but have to move thanks to special circumstances. You can lease out the house during this time for a maximum of six years before you have to pay some CGT.

 

Claim against the mortgage

You probably think that ‘mortgage’ and ‘tax exemption’ don’t go together in the same sentence but it’s possible! But tax benefits like this come with conditions.

Investors with interest-only loans can claim against it come tax time. Interest is the money you’re making on the house/commercial space. 

 

General upkeep fees

It’s the owner’s responsibility to make the property presentable. Because these services are of benefit to the rental property they’re possible to claim. Examples of maintenance fees include cleaning, fixture repairs, pest control, gardening, and more.

 

Management costs

You have to spend money to make money as the saying goes. Real estate advertising and fees paid to the property manager can be claimed as tax benefits alongside other management costs. Some of these are overlooked and owners potentially miss out on thousands.

  • Body corporate
  • Council fees
  • Land tax
  • Legal fees

Cleaers, real estate services, property management services…all eligible for tax benefits

 

We support self-education. Read these to learn more:

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3 underestimated real estate tools you need to up your game

Real estate is a game that’s brutal if you don’t know how to play it. Some investors are naturals, others learn from their mistakes and go on to build a successful portfolio. There’s plenty of different strategies and tools out there at your disposal. Here we list three that you’re maybe not taking advantage of, but very well should be.

 

  • Depreciation schedule

It’s said up to 80% of investors don’t know they can increase their income through depreciation. This is hundreds of thousands of dollars that’s not in your bank account, rather, it’s going to the government through tax.

Deppro’s depreciation specialists will survey the real estate you’ve bought and get back to you with a schedule that’s got a 40-year lifespan. You probably won’t have the property for that long, but it’s long enough for you to start seeing return on your investment. Our tax depreciation services are helpful to investors in residential and commercial property. If you’re a business owner, this means you can expand, or find a larger office space, sooner!

 

  • Property manager

These guys handle the daily tasks surrounding your properties so you don’t have to. Lots of investors also take on the role of ‘landlord’, but this doesn’t always work out well. Think of the problems that come with difficult tenants and knowing how best to set the rent.

Property managers don’t have to worry about ‘emotional investment’ like the owners of the properties do. They take a critical approach to screening tenants, how to set the rent (and adjust it), handling leases, and evicting troublemakers. You’ll find managers specialising in many areas of real estate, from commercial offices to apartments and homes.

 

  • Investment companies

These companies are made by investors for investors. They offer support services like educational seminars and specialised searches for real estate and property managers.

Property Club is an example of an investment company that encourages support, rather than competition. Of course, real estate is a competitive game but investment companies will have your back through your journey. Property Club has exciting events like property tours, access to expos, and other events like research and education seminars. There’s a further subset of clubs that members can join when they meet certain criteria.

These three tools are often overlooked but extremely beneficial. They save investors time, money, and emotional burnout. They’ll certainly make your investment game a lot stronger.

Rental property depreciation mistakes to avoid

Rental property depreciation is a bit of a mouthful but it’s an essential part of owning an investment property. Everyone makes mistakes when it comes to complicated tax matters, and that’s the reason why clients come to Deppro for professional help. We list a few common mistakes (plus more here) so you can avoid them.

 

  • People don’t depreciate. Ever.

80% of property investors neglect having their rental property assessed for depreciation. This mistake costs them thousands of dollars over the time they own the house, with the money they could earn going back into tax instead.

Deppro calculates that getting a depreciation report can earn investors back  60% of the property’s purchase price. These funds are often used to save for future properties.

 

  • Confusing the categories

The deprecation specialists place items of value into two categories: plant and equipment, and capital works.

Plant and equipment: The owners often move these into the house when they buy it, and they can be removed just as easily. Items in this category include:

  • Hot water systems
  • Air-con units
  • Furniture
  • Whitegoods
  • Curtains

The other category is capital works. These items are built into the house. They include:

  • Cupboards
  • Clotheslines
  • Fences
  • Timber (decking)
  • Bathroom fixtures

There’s more information from the ATO about assets eligible for depreciation in this PDF.

 

  • People overlook potential deductions

Investors make this mistake a lot because they don’t know what they can claim. This all adds up to a larger depreciation on the report the new owner receives. Claimable items include something as large as a swimming pool to something as innocuous as a smoke alarm. These potential deductions leave investors out of pocket when they’re not claimed.

If you’re an investor and don’t have a depreciation schedule, you’re missing out on thousands of dollars in returns every year. Those who do have a schedule are liable to make mistakes, like confusing what item goes into which category. To avoid mistakes like this, get an expert like Deppro on your side to take the guesswork out of rental property depreciation.