Investors buy a property for two separate benefits. First, they can rent their property out which ensures regular, steady cash flow. Additionally, they would calculate depreciation over an extended period. This would be done with the help of an investment property calculator. This calculator takes into account the annual depreciation while filing Australian tax returns. But in order to get the best benefits, the calculator must be accurately constructed. The depreciation impacts must be correctly calculated.
Who can Benefit from the Investment Property Calculator?
If you are an investor yourself, now you already know how you can benefit. But, for examples, if you are a real estate professional, you too can pass on the benefits of tax depreciation to your clients. This will help you gain a sense of trust from your clients, which might even lead to repeat business and referrals. But what if you are a regular tax consultant with no relation to real estate? You might still have clients who invest in property. You could use a good investment property calculator. This would help you to do the calculations accurately.
Who Can Help You?
Whether you are a property investor, a tax consultant or a real estate professional, you can be assisted by employing a dependable firm to help you calculate tax depreciation. If you are looking for someone with expertise in Australian property rules, Deppro can help. Deppro will provide you with the services of registered quantity surveyors, who can help create accurate property reports.
With the complexity in tax rules and the frequent updating of regulations, you need expert help. Expert help will ensure that you do not fall foul of the law. You can also get the maximum benefits by submitting the perfect investment property schedule.
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Planning to invest in the real estate sector? Looking for tips that can help you in tax deductions? Mentioned below are a few tips for Individual Real Estate Investors:
Property Taxes and Insurance:
Any expenses incurred on rentals of Property taxes and insurance are termed as deductions. In the event that you purchased your rental with traditional financing, you are most likely making property regulatory expenses and protection costs on a month to month premise into an escrow account. It’s imperative to acknowledge that the installments into escrow accounts are not really deductible. Rather, you can just deduct property assessments and protection when paid out of escrow. Have a look at the federal tax depreciation schedule for some more tax deduction tips.
Property Depreciation and Tax Deduction:
Devaluation is a yearly conclusion that is conceded to venture land proprietors or proprietors of equipment utilized for business purposes. You may be confused as to why your property deteriorates when in reality the land value increases. While the facts demonstrate that the estimation of the land and the building has verifiably appreciated over time but, you got to think from a micro level as well.
The estimation of your rooftop, for example, diminishes after some time as it decays each passing day. Deterioration tracks the value loss every year. The interesting thing about devaluation is that you don’t need to pay out-of-stash for it every year. Rather, you pay for everything forthright when you purchase the property. Thus, it helps in tax deductions.
Firstly, you will get the full Property depreciation and tax deduction (reserve funds) from the findings in the present year.
Secondly, since the cost is a repair, the cost isn’t a change and deteriorates over various years.
You can save on tax deductions on amortizations, maintenance, education, meals, travel, and home office.
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No one loves paying their taxes. That’s why you shouldn’t let go of an opportunity to legally reduce your tax. The guidelines regarding property tax depreciation allow you to do exactly that. If you go through the provisions of ATO property depreciation you will understand exactly how you can reduce your tax burden, but in this article, you can read that in very simple terms of 5 easy steps.
1. Understanding Your Assets
You need to demarcate each and every asset on your rental or investment property into the two broad categories of capital works and plant and equipment.
2. Getting an Expert Opinion
If you are not sure about how the distinction is to be made, you can get a dependable company like deppro to review your property and list down all the assets correctly. This is done by one of their certified, professional quantity surveyors.
3. Preparing Property Tax Depreciation Schedule
Based on the property review done completed by a qualified quantity surveyor, a complete property tax depreciation schedule would be prepared to detail the exact amounts of depreciation each element of your property is subject to. The company whom you have employed would prepare the correct details of each year’s depreciation.
4. Completing Your Tax Return
Once your depreciation schedule is ready, you need to go through the ATO regulations to understand what tax allowance each depreciation amount attracts. Based on that, your tax return will need to be reworked and the additional allowances factored in.
5. Check Your Refunds
If you pay advance tax, then the tax deductions your depreciation will allow you, will be granted to you as a refund. Make sure that this refund is exactly the same as the calculations you had calculated earlier.
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It’s everyone’s dream to own their very own property. It not only makes you feel good, but it brings rental or investment income too. But like everything, the value of a property decreases over time. This has nothing to do with the market value or the cost of raw materials. It is an economic principle called depreciation. Every year the components that make up your property become less valuable. Australian tax laws lay down a process for claiming depreciation on a rental property. This ensures that you are entitled to tax deductions. The extent of those deductions depends on the amount of depreciation.
Steps Involved in Claiming Depreciation on a Rental Property
The first thing to do is to assess the property. Every single asset on the property needs to be properly evaluated. You can use the Deppro contact number to get in touch with a reputable company for your depreciation claims. They will divide your assets into the correct categories and then they will allocate the correct depreciation rates as per ATO rules. Based on this, your depreciation schedule will be prepared, thus, the correct tax return can be filed.
The Correct Tax Returns
You might have often wondered can you claim depreciation on a rental property? The answer is yes. Depreciation can be claimed during filing tax returns. The process for claiming depreciation on a rental property is quite simple. But it might become tedious if you do it yourself. A good company with good quantity surveyors can make the process much easier. A team of expert quantity surveyors can make the task of claiming depreciation on a rental property extremely simple.
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Burnout isn’t fun. It’s a result of investing in everything except yourself. As a property investor, you must be on the top of your game if you want to grow your portfolio and increase chances of financial freedom. Not all of these tips are based on financial success. They’re about investing in yourself and your worth.
The property investor community is full of people boasting about their annual return, how they got a discount on their capital gains tax, adding a family home (not an apartment) to their portfolio, etc.
No two investors are the same, so stop comparing yourself to that person in your head right now. Their strategy works for them and your strategy works for you. A self-described guru might be up until early hours looking at deals. You prefer 8 hours of solid shut-eye and check your emails for alerts the next morning. And that’s okay.
Talk to a professional
Asking for help isn’t a sign of weakness. Confronting problems head-on and admitting what they are is strength itself. People don’t know who to turn to sometimes, especially when it comes to their ‘failures’. Go to your GP for a referral to a psychologist and book an appointment. Mental health is just as vital as physical well-being. That brings us to the next point.
Take a day
Is your property investor role more of a side hustle? A majority of people in the game work full or part-time jobs and devote a small amount of time to the real estate market. Juggling two roles will lead to burnout and that’s why it’s important to take a day off. Don’t be a hero, it’ll result in a meltdown.
Do things that make you smile
You enjoy being a real estate aficionado but it’s a business, not a hobby. What would you say you don’t have time for anymore? Take an hour, half an hour, out of your day and do something that fills up your soul. Exercise, art, reading, swimming, baking are some suggestions to get you started.
Distance yourself emotionally
Emotionally investing in real estate is a recipe for disaster. That’s stress you don’t need in your life on top of work and family.
Detachment and being brutal in your choices will feel uncomfortable at first. But those tenants who keep disrespecting your investment home, for example, aren’t your family. The property manager dragging their feet and not returning your calls isn’t your best friend. Evict, cut the cord, and look for what serves you better. You’re a property investor, a businessperson. And people in business are successful because they make uncomfortable choices.
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Your rental property won’t earn you income straight away, but there’s ways to get to that point a bit faster.
80% of property investors are unaware of the tax benefits they can claim through depreciation. Imagine getting back thousands of dollars every year, on top of your (still meagre) rental income. The value of what you purchased this year won’t have the same value ten years from now.
Book an inspection as soon as you settle the property. The quantity surveyor will write up the report and send it back to you a month after their inspection. Get it to your accountant as soon as possible after that so it’s on hand in time for your annual return.
Increase the rent
As the area’s profile grows, so will demand and rental prices. It’s not unreasonable to change the rent a little. 2 – 3% is enough annually. Link it with new amenities like appliances or a paint job to show the tenants that it’s worth the increase.
Charge for amenities
‘Little luxuries’ can also boost the cash flow for your rental property. Cleaning services, internet connection/wifi, gardening, Foxtel and the like are all extras that can earn you a couple of extra hundred dollars.
Charge for the parking space
Same as renting out the apartment, rent out space in the parking garage (if your property is part of a complex). Inner-city parking is especially coveted. If there’s no parking on-site, look a one of the links below to investigate the possibilities of leasing a space.
Tenants are picky and they’ll choose properties that suit their needs. They’re busy people with kids, pets, and full-time jobs. Their home should be a place to relax and let the dog off the leash. Here’s some of the items on their list;
Location: tenants want a rental property close to work, school and the shops. Public transport right on the doorstep and lifestyle in the neighbourhood is a plus.
Housekeeping: A dishwasher, laundry area with at least a washing machine and a fully equipped kitchen is a big one. Bonus points if the appliances in the rental property are stainless steel!
Nature: Natural light, balconies, and yard areas for pets are also on the list. You might be hesitant to lease to tenants with pets, but more and more people are adding furry friends to their family.
The list goes on, but upgrading the appliances and raising the rent to cover the garden/maintenance fees is a place to start!
Read this before using your investment property as an Airbnb
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Leasing your investment property on Airbnb is a risk. You dream about earning extra income, and it’s wise to find a few extra streams to boost your bank balance. But is it worth the extra work we’re about to remind you of below?
Rules and regulations
And there’s a lot of them. There’s zoning laws, tax income laws (it must be declared; but this is often ignored) and local council approvals to look at. As written by Cortado Lawyers;
An Airbnb host will need Local Council approval (and a licence) as Bed and Breakfast accommodation (B&B) if they provide on a commercial basis: (a) rooms for overnight accommodation; and (b) at least breakfast or common cooking facilities; and (c) more than two or three double rooms for rent (which accommodate more than 6 people). A manager will usually reside in the property. The precise requirements vary between Local Councils.
AirBnB has also partially answered the question;
…please review your local laws before listing your space on Airbnb. More information about your city’s laws and regulations may be available on our Responsible Hosting page in the Your City’s Regulations section.
By accepting our Terms of Service and activating a listing, you certify that you will follow your local laws and regulations.
Costs over income
Cleaning fees, gardening, maintenance, and even insurance are only some of the costs you must consider. The latter is especially painful for landlords whose tenants are illegally subletting. Any insurance on the investment property and the tenants living there is made void.
You can charge more ‘rent’ because the cleaning fees are included in the final cost per night. You can also raise the rent as you like when it’s peak season because people will be looking for an alternative to hotels. But don’t expect your investment property to magically attract income within a week of putting it up. Short term rentals equal higher maintenance costs, on top of AirBnB taking their fee.
With regular tenants, you have guaranteed income for the duration of their lease. They could be in your rental property for years.
AirBnB, like hotels, is more seasonal. Holidays, festivals, and other events affect vacancy rates. Can you afford your investment property being empty for weeks at a time?
You’ll pay more than you make if you don’t play smart
Investors leave most of the care duties to their property managers; collecting rent, organising maintenance, and evicting troublesome tenants. But when you own the property, you become your own agent. Hosts with great reviews get more bookings, so you must be prepared to act as a concierge if necessary.
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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:
Retail outlets (cafes and boutiques)
Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?
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:
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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.
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
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.
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.
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Thanks to constant news coverage about rising population numbers, employment, and therefore housing affordability, the property market seems less accessible than ever. Investors are asking themselves what they can buy for half a million, so we’ve compiled a short list. One home for each state around Australia.
This apartment is in the trendy suburb of Teneriffe. It comes with river views, easy access to the city, and a host of gyms, shops, and restaurants. Similar properties are around the same price, going up to as high as $2 million.
This home is in the rural village of Dunedoo, 100kms from Dubbo. It’s on the market as a ‘recently renovated property’ though new owners can modernise it as they like. This is a steal in today’s property market, and has the potential to be a home for holiday tenants.
Not bad for a Ballarat townhouse. This home, only three years old, is good for those investors looking at homes for empty-nesters and downsizers. There’s a small backyard area and spacious bedrooms inside. The townhouse is close to shops and schools for small families.
Investors looking for a small family home on the property market would snap this up for a minimal amount. Zeehan is a small town of less than 800 and the house is down the road from the local school. It’s marketed as having a double block of land, new external Colorbond, and a rumpus. The interior is quite dated, making it a prime candidate for renovation.
Just within the $500k budget, this stunning house is a rarity. On the outside, it looks like a grand home, a mansion, even. When really, it was renovated to work as an apartment block with three units. The exterior keeps its Mediterranean style character from when it was built in the 1930s, but the interior is totally modern, complete with an elevator. This is definitely a steal in the 2017 property market.
You can spend just over half your budget and get a lot back in return in WA. This cottage was built in 1927 and leaves investors some room to redecorate, so you can claim depreciation on any new fixtures you install. There’s a large amount of exterior space, perfect for tenants with pets and children.
Getting a home with a pool for less than $500,000 is a miracle, but it can be done if you’re looking at the property market in the Northern Territory. This home recently underwent a massive renovation that included the installation of the pool. Located in Katherine South, the home is close to the library, the public hot springs, and national parkland, making it good for family/tourist tenants.
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