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Depreciation assistance for real estate professionals

To make a sale, real estate agents need to rely on cold hard facts. Their clients need assurances that the property they’re seeing is the best investment for them. It doesn’t matter if the property is a commercial building or a home; if there’s benefits available, it’s music to anyone’s ears.

 

There’s two classes in a depreciation schedule: capital works, and plant & equipment. Capital works are things the ATO considers permanently fixed to the building (bricks, mortar, wiring etc). Plant and equipment is a different matter. Items in this category are things that can easily be removed from the building such as carpet, furniture, and even the smoke alarms. Thanks to age and general wear, the items in both categories will lose value over time. This creates an amount that can get claimed on a tax return every year.

 

Having access to ATO-approved depreciation schedules almost on-demand is a great asset for real estate agents and property managers. They can present tangible tax benefits to their clients during a sit-down meeting or even during a property inspection.

 

Real estate agents know that their clients are looking for the best deal. Presenting the depreciation schedule is a huge advantage in helping them close a sale. Depreciation is essentially the same as savings, or money back from a PAYG statement. It shows the property’s earning potential and can be the difference between a negative-geared asset and turning a profit every week.

 

Property managers will also benefit from professional depreciation assistance. If their client is unsure of the tax breaks their property can provide, managers can look up a deprecation report just as easily as a real estate agent. Oftentimes the investor doesn’t know they can order the depreciation report themselves and turns to their manager for help.

 

The benefits that real estate agents and property managers can reap from depreciation assistance are numerous. They don’t just build trust with their client by providing the basis for sound advice. They’ll net a sale and gain a reputation for handling properties with amazing tax benefits.

5 ways to find the best property investment

The idea of property investment is exciting. Whether you’re looking to expand your business or you’re an investor wanting to add another portfolio, the anticipation outweighs the dread…most of the time. People who are new to the property game often find themselves disappointed and reaching too far outside their budget. How do you avoid this yourself?

 

  • Be realistic

You have dreams, but reality will give you a rude awakening if you’re not careful. Working towards a goal slowly and steadily ensures stable growth. If you peak too high, too fast it will all come crashing down. Not meeting payments, having bad tenants, or finding faults with the property after purchase are all possibilities if you rush into buying.

 

  • Hunt everywhere

Even though most people still look for their next property investment online, the newspaper listings are still a valuable resource.

When we say hunt everywhere, we also mean broaden your search radius. Seasoned property investors and business owners have places all around Australia. Search online for the best growth suburbs in Australia, you’re bound to see something that ticks the boxes. Which leads us to the next point.

 

  • Write a list

This will keep you on track, and honest. Whether you call it a purchase plan, a property checklist, or something else, make sure it’s on hand when you’re looking at places. If you’re concerned about depreciation, add these to the list:

  • Has any renovation work been done recently?
  • Are the fixtures in good condition?
  • Will this still give me income X years from now?
  • What’s the area in meters squared?

 

  • Turn off your emotions

This step is crucial. Letting your emotions get into the mix leads to burnout and heartache. When things don’t turn out the way you hope (you lose the bid, offer rejected, etc) of course it’s disappointing. But you keep your chin up and carry on. The best property investment for you is out there; you just have to look a little harder.

This point ties into point number one about realism. If you’re an investor looking for rental properties, don’t think about the hunt as looking for your dream home. Not even if it’s ten years down the track. You’re looking for a place that will attract tenants and generate income for you. The best property investment for you might be a home or an apartment that doesn’t  suit your tastes, but will be perfect for someone who rents it from you.

 

  • Get the professionals on your side

As soon as the property is settled, call Deppro to have a quantity surveyor inspect the property. You’ll receive the best, most accurate depreciation schedule if they see the place in its original condition.

Also invest in a property manager to find tenants (again, avoiding emotional investment). They’ll manage the bulk of caring for your portfolio. After you receive your tax depreciation report, hand it over to your accountant. They’ll make sure you get the maximum refund every year, contributing to your coffers so you can keep growing.

3 real estate strategies to build the ultimate portfolio

Commercial, residential, apartments, houses, duplexes; the potential in real estate is endless. There’s different real estate strategies that investors can use for any of the above. Each approach has its pros, cons, and methods that will build your portfolio into something amazing.

 

Commercial property

There’s more differences between commercial and residential real estate than just the name. When placing a deposit on a commercial property, expect to put down up to 30% of the settlement price. You’ll also need a tenant that guarantees income no matter how competitive the market.

Lots of work goes into researching commercial real estate. Investors must look at demographics, market potential, spending habits of residents, and the like to make sure they get the best return. When the tenant signs the lease, the contract will last a long time compared to a residential one. Think between three and ten years.

 

Capital growth

You put a lot of work into finding a good piece of real estate, so it should work for you in return. Capital growth means you hold onto the home for a while, expecting it to make a nice profit when the time comes to sell. The resale price is affected thanks to area profile like access to schools, public transport and shopping.

Investors using this strategy must have patience if they want to see the benefits. Working a depreciation schedule into this will also help you net a larger profit. When the building depreciates, so does the cost base. Lower cost base (aka lower worth at resale) means less capital gains tax to pay.

 

Surrounding suburbs

It’s oh so tempting to buy in a capital city, but it costs more money and there’s often too much competition. The Australian apartment glut means investors are snapping up properties in bulk, almost suffocating each other in one suburb or just one building.

Popular growth areas aren’t just suburbs in the city. Regional, outlying real estate is great for negative gearing, with the eventual goal of a profit at resale. This is because investors see the potential in the homes and the general area and have the patience to wait for the right time to sell.

Buying an investment property for under $500,000

By Paul Bennion, Managing Director of DEPPRO

 

In most capital cities of Australia, apart from Melbourne and Sydney, there are still a plentiful supply of properties priced for sale under $500,000. This includes Brisbane, Perth, Adelaide and Hobart. Major regional centres such as the Gold Coast in Queensland and Bunbury in Western Australia have this abundance of properties as well. In Perth, for example, it’s now an investors paradise. There’s many properties currently listed for sale under $500,000 located within a 20 kilometre radius of the CBD.

 

$500,000 is around half the median house price of Sydney. Properties in theses competitively priced capital cities offer a low risk entry into the property market. There’s added potential for capital growth moving forward. Yet, it’s important that first time investors take a cautious approach to their first property investment purchase. Realistically, they should focus on buying an investment property for under $500,000.

 

It’s an unfortunate fact that too many first-time investors financially over expose themselves. They buy an expensive investment property that limits their ability to purchase more in the future. This is especially the case if they purchase an expensive property in the wrong location. That could result in a financial nightmare. In contrast, buying a lower priced property that’s got the potential for strong capital growth is an important building block to creating a successful property portfolio.

 

Lower priced properties tend to have higher rental returns. This is important in a climate of rising interest rates, with the major banks increasing rates for investors over recent months.

 

Issues you should consider when buying a lower priced property include:

 

  • Spend time researching all aspects of property market before even looking for an investment property. First time property investors need to consider factors like negative or positive gearing, rental returns and depreciation.

 

  • Past trends in property values will generally indicate future trends. Therefore, it’s wise to examine the long-term capital growth rates of the suburb.

 

  • Take a broad approach to buying an investment property. Most first-time property investors buy a property in their local neighbourhood because they’re familiar with the area. By taking a narrow approach to the location of the investment property, first time investors severely limit their options.

 

  • Target suburbs in lower priced areas that have a higher number of properties for sale. A simple tip is to check the internet and weekend papers. This helps investors discover areas with a larger number of property ads.

 

  • When you have selected a suburb, don’t make an emotional decision when choosing a specific home. Most first-time investors purchase a property they’d like to live in. It’s important to remember that the investment property must appeal to a tenant who’ll be paying the rent.

 

  • Check out any planning changes proposed for the suburb. Many local governments are undertaking reviews of zoning that potentially have a major impact on property values. For example, a property that was purchased for a single residential use and then rezoned by the local council, as a triplex site. The property in turn notably increases in value.  The planning department of a local government can inform first time investors of any proposed zoning changes.

 

  • Check out any planned infrastructure changes in an area you’re interested in buying. For example, an upgrade of a local shopping centre or a new railway station will make a major impact on local property values.

 

  • Make sure that there are tenants prepared to rent your property. Rental income is a key factor in serving the loan. If you can’t find a tenant, then you’ll have problems keeping the investment property over the longer term.

 

  • Check your finances before you consider buying anything. If you have pre-approval finance it will allow you to move more quickly to secure the right investment property.