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10 Things You Need To Tick Off Before You Buy an Investment Property

When you are in a situation where you are able to put money into an investment property, it’s an extremely exciting time. But if not thought out properly, such an investment could actually push you into financial stress which could lead to mental distress as well. To help you out, here is a quick list of 10 things presented by Deppro Qld that you need to do before and during the purchase of property investment.

  1. Plan well: This is so obvious that it shouldn’t be on this list at all. But lack of planning can cause are series of losses you want to avoid. Things like the location you’re looking to buy at, how much you can afford to spend, who will manage your property, loan implications, property tax depreciation etc need to be well thought out.

 

  1. Consult experts: The first set of people we talk to are our friends and family in the process of decision making. We all like to be able to find someone who has their own investment property. But in order to ensure that your investment property actually provides good returns, you need to take the advice of experts like Deppro Qld.

 

  1. Insure yourself: Assuming that you would need a loan when buying your property, make sure that you have insurance coverage so that your family is not thrown into the deep end if something happens to you.

 

  1. Think like an investor: When it is time to choose your property, try putting yourself in the shoes of the person who would rent it from you.

 

  1. Do your research: You need to be sure about the going rates for not only the properties similar to what you are buying, but also be aware of tax implications of the fixtures and fittings you are using so that you can claim tax deductions on your property depreciation reports.

 

  1. Backup: Buying an investment property is similar to buying a car. You need to have money for the purchase, but you also need to keep a little aside for regular expenses like repairs and utility bills.

 

  1. Sharpen expenses: When you are investing in a property, remember that it is a medium to long term financial investment. Try to bring in some fiscal discipline on other fronts like credit card expenses or other ad hoc expenses.

 

  1. Keep the target in mind: You should spend on your property according to the location of the property and the likely tenants/buyers who would rent/buy from you. If the property is in a high-class neighborhood, for instance, invest in a pool, but otherwise, avoid those sorts of expenses.

 

  1. Choose the right entity: In case you are already burdened with tax commitments, consider buying in the name of a trust fund or get your spouse to buy it. That way you would be able to get the maximum benefit from the depreciation on investment property.

 

  1. Use the laws: When people are considering an investment property, they often use available funds to buy outright. Even if you have your funds, try investing that in a better instrument, and offset your interest expenses by the tax deductions available through law.

Like I said earlier it’s always a great feeling, whether you are planning to purchase your 1st, 2nd or 10th property. So, plan well and prepare yourself completely before your investment.

Depreciation and Your Investment Property

When a person buys an investment property, the intention is to generate an additional revenue stream from the rentals. But the process of looking for a good tenant and setting them up is not that easy. Then there is the issue of regular or ad hoc maintenance expenses, which eat away at the rental income. On top of that, there is the matter of paying taxes on the property and its income.

The Australian tax rules have made it possible for homeowners to get some relief from the taxes they need to pay for their property and its income. The rules regarding depreciation residential rental property provide for a reduction on tax on account of the depreciation of the value of the property.

There are two ways in which the deduction can be calculated. It could be either on the capital works or on plant and equipment. It is required that a complete tax depreciation schedule for rental property is created by the owner. This is a specialized job for which experts need to be brought in.

There are several companies which offer this kind of service. They employ qualified quantity surveyors who are trained to create this kind of report. It requires detailed measurements and counting of each and every small and big element on the property. Based on those data points, the complete rental property depreciation report is prepared. This is then used in and submitted along with the tax returns of the property owner.

There are some things to be kept in mind when claiming tax depreciation on investment properties. Here are some of them:

  1. There are cutoff dates for properties laid down. For commercial properties, the commencement date is 20th of July, 1982. For residential properties, the date is 15th of September 1987.
  2. For plant and equipment assets, the effective lives of each element would be taken into consideration. ATO has laid down a detailed list for this, and the tax returns would be filed accordingly.
  3. The individual effective life would also depend on the type of property where the plant and equipment asset has been used.
  4. House owners need to keep in mind that the depreciation rules would only apply if the property is not being occupied by the owners. Therefore, it has to be a rental or investment property for the depreciation rules to be allowable.
  5. The above rule can be relaxed if the property is purchased and owned by a trust or a company instead of an individual. In such cases, the owner (individual) can move in as a tenant of the trust and claim depreciation.

There are several good companies who can help you create the depreciation report for your property in line with the current regulations. They have teams of qualified technical specialists who would help prepare the depreciation reports and file the tax returns accurately.

Should I Buy an Investment Property with a Swimming Pool?

When you are looking to invest money into a property where you do not plan to live but rather rent out, you need to strike that sweet spot where minimal investment and maximum returns meet. Your property investment returns must be greater than the upfront costs and the recurring costs put together.

How Wise is it to have a Pool on your Investment Property?

Let us take an example of a swimming pool in the backyard of your house. Who doesn’t like to imagine a lazy sunny morning spent lounging by the poolside? Is there any greater joy than a swim in crystal clear blue water? A pool adds a lot of value to a house, for the owner as well as the resident. But we need to remember that a pool comes with several costs.

The Cost of a Swimming Pool

The cost of building a pool might be a one-time investment, but the maintenance of a pool is quite costly, and those costs are repetitive. If you have a traditional swimming pool, then cleaning of leaves and other debris would need to be done manually. But for more modern self-cleaning pools, the costs become higher. The property report for a house with a pool would have a large chunk of the expenses earmarked for the pool.

What Australian Tax Depreciation Rules Say?

Having read so far, you might be tempted to think that a pool on your property might not be such a great idea after all. But there is another important factor to consider – the Australian tax depreciation rules. As per these rules, several elements of the cost of building and maintaining a swimming pool can be set off against depreciation, and tax deductions can be claimed on them.

This is how it works. When a house is constructed, the money spent on it could be broadly divided into two categories. The first is capital works, and the other is plant and equipment. Capital works would include the fixed part of a building, like the walls, floor, and wiring etc. Plant and equipment would include removable parts of the property like smoke detectors, upholstery, electrical appliances etc. A complete list of both these types of depreciation expenses needs to be made by a certified agency like Deppro using an investment property calculator. This list is then submitted along with the tax returns and deductions are availed on tax on the basis of the depreciation calculated. Many elements of the cost of a swimming pool construction can also be included in this list and deductions claimed.

Final Thoughts:

On the whole, you need to consider the location of your property, the cost of the pool, and the amount you can claim later as tax. After considering these factors, you can decide wisely whether you should buy an investment property with a pool or not.

What You Need to Know About the Legislation Changes to Rental Property Tax Depreciation Claims

It’s always quite confusing to adapt to new changes. Similar to the altered legislation to the rental home returns which were observed in 2017. It has been tracked that numerous investors and rental property owners have issues regarding the claims available for them.
To everyone’s relief, what is worth appreciation is that the items under the Capital Works such as the swimming pools, toilets, windows, foundations, walls, and ceilings can be claimed for deductions just like before. There are no changes made to that category.
The alteration has been in Division 40 which includes the subparts of Plant and Equipment category including the electronic appliances, carpets, alarms etc. These are the assets which are extra, in other words, which aren’t a part of the built of the property.
Which Properties Got Affected by The Change?
Well, when summarized, it can be said that the deductions for the above-mentioned category that is the Plant and Equipment is not applicable on the condition that the property was made second hand after 7:30 pm on May 9, 2017. All the investors who have invested in the second-hand property before the mentioned time and date can claim returns on depreciation residential rental property as they used to before.
Also, if a new Plant and Equipment asset is bought after the specified date, it is applicable for claims until the asset’s life remains effective. Lastly, another notable fact is that the investors residing in their building before July 1, 2017, do not have to think about the changes made in the legislation as they are exempted from it.
How to Claim the Right Returns Efficiently?
Sometimes technical terms become quite difficult to understand and analyze and hence it is better to seek professional help rather than trying to be the jack of all trades and master of none. Hence, creating a tax depreciation schedule for a rental property can be extremely easy if done by an experienced, professional quantity surveyor. A person with that profession knows exactly what is to be done for your property and will help you extract maximum benefits by giving you a clear-cut view of your costs, expenditures, and returns.
There are a number of companies providing professional help to people in need of a good tax depreciation schedule and hence you can look out for one such service provider.
The main advantage of choosing this way is that they have immense knowledge about the concerned topic and they are aware of such minor details which can fill up your pockets and make you feel rich by just paying a humble fee for the service.
What after June 30, 2017?
For your information, even if it is past June 30, 2017, you are eligible to calculate depreciation on rental property and submit a tax schedule with your tax returns for 2017-2018. Hence, it’s a win-win situation for many of the investors.
Deriving complete information of such legislative changes isn’t a cup of tea and might leave you confused and unsure of your action despite the hard efforts. Thus, a little bit of assistance and help is never harmful.

How Is Depreciation Applied Following Natural Disasters?

Annually, people lose millions and millions on their properties owing to unforeseen natural calamities. These unforeseen disasters hit them like a wave leaving nothing but ruins. Natural disasters especially affect realtors and property investors. These participants of the property market more often than not, find themselves in heavy debts and losses.

Such stressful situations call for replacement of assets as well as rebuilding and refurbishing all their entire property.

The brunt of this challenging process has to borne by both the property owner as well as the tenant. However, the final improvement brought upon the property makes it for a better asset. And thus invites a rather increased depreciation deduction tax. This tax depreciation must be studied properly.

How to Maximise As Well As Maintain the Compliance?

The following table will indicate exactly how you can optimise your compliance for depreciation deduction levied on your disaster-ridden property. And hence give you a better insight into depreciation tax benefit.

Asset Properties Covered in Insurance Properties NOT Covered in Insurance
Replaced Will need to make alterations in the Tax Depreciation Report Scraping of the residual value of the replaced asset + calculating depreciation for the new asset.
Repaired Instant deduction of the expenses for repairing + declare any arising income from insurance Instant deduction of the expenses for repairing
Upgraded Will need to make alterations in the Tax Depreciation Report Scraping of the residual value of the replaced asset + calculating depreciation for new asset.

The Jargon of the Table

  • Repaired: It refers to the minor tweaks here and there in the pre-existing asset to restore it. It doesn’t mean improving upon its appearance but only the functionality.
  • Replaced: This refers to procuring a replacement for the pre-existing asset which mimics its exact functionality and usage. In short, a new asset of the same model in place of the original mode.
  • Improved or Upgraded: This refers to the replacement of the damaged asset or machinery. However, here the new model so procured is an improvement or upgrade to the existing asset. Which means a better functioning and more specifications.

The Process

The entire property of availing deppro benefits can seem a little daunting but here’s how it goes down:

In case the quantity surveyor has initially assessed the entire property which is being claimed for then it gets easy. As now it only requires adding alterations to the previous report which can happen at a minimum cost.

But, in case the prior assessment of the property in question didn’t take place, then it gets more cumbersome. As now you need a full inspection followed by creating a report.

This should be noted that the time of the entire procedure is crucial and thus it should be attended as soon as possible. We suggest you to approach our experts with individual situations or crises. This will ensure that all your previous, current as well as future claims are optimised. They will also ensure that if your claims are in compliance with the ATO guidelines or not.

Wrapping-Up:

Disasters don’t come announced, they can hit you anytime, anywhere without notice or warning. Such situations can have repercussions. So it’s best that you’re prepared with all the ins and outs of knowing your depreciation for property.

Our website is specifically curated to deal with such mishaps. Hence, if you’re facing something similar or you may want to be prepped for the future, then contact us. We will tell you all there is to know about the procedure for claiming depreciation on the property as well as its implications.

So what are you waiting for? Contact us today!

4 Facts every Property Investor Needs to know about Claiming Depreciation on their Rental Property

When it comes to depreciation schedules for your rental property, it is quite important to know all the necessary facts included within the same. Given below are four important facts to understand tax depreciation:

Fact 1: Depreciation is known to be the largest set of deduction, which is available for any property investor

To start off with the first fact, it is really important to know that tax depreciation is known as one of the largest set of deductions. Depreciation lies within the range of $2,500 – $5,000 for the existing house whereas the brand new one averages around $10,000 – $13,000 per unit. It is typically done for the first complete year for standardised residential houses or properties.

Let’s Take an Example to Understand Deppro Tax Depreciation

John, a senior officer of the IT department happens to purchase a unit in his city to make his first investment. That very unit was built around 10 years ago, as a matter of fact John bought it for around $540,000 in the month of April 2017. The yearly income of John is $75,000.

Every year John’s unit goes through the aging process, along with all the other common areas that go in the unit development. As John bought and rented his very property before the 9th of May, 2017, he can raise a claim for the act of depreciation of his building. In addition to that, he can also raise a claim of Deppro tax depreciation for the entire assets included, as a matter of tax deduction.

Fact 2: New properties happen to generate better depreciation deductions for all the investors

When investors purchase brand new properties for investment purposes, it ends up generating greater depreciation deductions. It can be the very case for two vital reasons:

When it comes to constructing today’s properties, it costs an individual more than it was back in the day. A very important way to calculate depreciation is by calculating a mere percentage of the whole construction cost that will be deducted each year. When all the equipment and plant assets are new, it initially ensures that they are eligible enough for the annual depreciation deductions.

Fact 3: It is been said that 90% of properties that are old qualify for deductions in the shape of depreciation

It is quite vital to understand that new properties happen to generate one of the best depreciation deductions, which many of the investors fail to realise. To understand it in a much easier way is when a property is built 40 years ago, it is understood that there will not be any value left in order to depreciate and later claim.

If one specific property was bought before the 9th of May 2017, the assets that come within that very property will also qualify or be eligible for depreciation deductions.

Fact 4: Benefits of tax depreciation, when claimed, outweigh the impact made on CGT

Some of the investors are only concerned about the claiming of depreciation now, and on the contrary think that they are only increasing their Capital Gains Tax, which will be made payable if they happen to sell off their property.

Having said in the tax depreciation report, that only the depreciation, which is claimed for Buildings and Structures are deducted from the cost of your base. The Deppro tax depreciation cannot be claimed on Division 40 – assets such as stove, hot water system, blinds, and air conditioner.

Properties rented or bought after 7.30pm in the month of May 2017 do not make annual claims for the act tax depreciation report of depreciation on Division 40 assets present in their property. However, when the property gets sold out, the value accumulated on that depreciation is claimable as the expense, which further goes on to reduce profit on its sale as well as the potential payable CGT.

Know the Status of Depreciation Deductions on your Property

Mentioned above are some of the most important facts that investors need to keep in mind before claiming depreciation on their rental property. An easy way to do so would be to use Deppro tax depreciation for further assistance.

Easy Ways to Increase Your Property Value before Selling

Much like the anticipated returns from a company’s stock and income yielded from bonds, you may also anticipate investment returns on real estate. To your surprise, there are various ways to go about increasing the property value. Now learn these ways to improve your real estate property while providing a smooth cash flow:

1. Rental Income & Maintenance:

Properties placed on rental accommodation are known to churn exceedingly well dividend returns. Homeowners and real estate investors have a lot of autonomy and control over the degree of risk to their cash flows.

Although there are circumstances of slow markets and slumps and slacks in property investment, conventionally residential owners lease the property out for several years. During this period they don’t even experience a decrease in the rental amounts as such, you can check this by using an investment property calculator.

2. Increases in Property Value by Appreciation:

Real estate has always known to increase with respect to its property value as the years pass. This is a natural source of increasing the value of your property over time. The fluctuations are very apparent but there can be an expected rate of increase in the value of the real estate.

3. Inflation:

Although the payment of your mortgage is going to remain the same, the level of inflation will work in your favour. It will increase your house’s construction cost while also increasing the rent. The housing demands owing to the unending growth in population also play a part in driving the property value.

4. Use the Equity:

The equity present in your property will increase as you go further in the paying process of your mortgage. Equity is generally decided at the time of final sale, however, seldom, people use this equity for other projects. You can take this up and invest this back in the real estate. Or you can even indulge in the renovation and refurbishing of your property to hike its value and then monitor the hike by using an investment property calculator.

5. Maintenance & Upkeep:

When you receive your monthly rental revenue, you can not only use it for personal purposes but also use it for the upkeep of your investment property. This ensures good cash flow as well increase in property value by means of good care and maintenance. Such initiatives definitely increase the price of your property.

So when you liquidate your property the value will evidently be increased. Upgrades with respect to its interiors infrastructure and functionality can considerably impact the value of it.
Housing trends are constantly on the move so if you want to retain its value in front of investors, you should keep the property interesting.

6. Upgrades:

For a more impactful and considerable increase on the return of your investment, indulge in upgrading your property, Keep track of all the improvements that can create a significant impact and increase your property value. You can even create a property report to view the progress better.

For instance, putting into place energy-efficient equipment or appliances, placing more windows to create natural lighting etc. These things make spaces functional as well as lively. Such an impact can be made by remodelling your washroom or tweaking your master bedroom here and there. Insulating your house can also have a huge impact.

So make a note of these ‘noteworthy’ upgrades while staying in your budget.

Wrapping-up:

As a home-owner or even a real estate investor, it is important to be on the lookout to find ways to increase your property value. Real estate is one of the most lucrative places to invest in. You can even monitor the hike in your property using investment property value.

Tax Depreciation for Investment Properties

Most investors are aware that their property’s value will only decrease over time. But many investors are not aware of the benefits of this depreciation on investment property. Depreciation can help an investor claim tax benefits. The loss due to depreciation would be partly offset by the tax allowances claimed. A typical rental or investment property would have several components. Some would be fixed and part of the property. Some would be attached or constructed additionally. A property depreciation schedule would enable the right tax breaks to be computed. Let us see how an owner can take the help of companies like Deppro Perth to do this.

The Need for an Accurate Schedule

Different depreciation rates apply to different components of a property. As per Australian tax rules, each type of attracts different tax allowances – a property owner might not have complete knowledge of this. It is also time-consuming and tedious. That is why property owners often entrust the job to competent agencies. This ensures that the tax breaks are accurately claimed.

Calculation of Depreciation on Investment Property

A good agency would have competent Deppro quantity surveyors. These surveyors assess every small and big asset included on the property. This is done in strict accordance with ATO guidelines. The rules laid down by ATO often undergo revisions: Deppro quantity surveyors are always completely up to date with such changes. Therefore, you are guaranteed an accurate calculation of your depreciation with Deppro surveyers. Once depreciation is accurately calculated, the right tax deductions can be claimed.

Investors can easily claim the benefits of depreciation on investment property; these benefits accrue through allowable tax deductions. A well-trained and knowledgeable quantity surveyor from a reputable company can help claim the maximum tax benefits. This also ensures that tax benefits allowed by law are not missed.

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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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