Why 1 bed properties make great investments?
As a property investor one of your key goals is to maximise your return on your investment. And when looking at property tax depreciation, often less is more. So a cheap one bedroom apartment or studio could in fact deliver you the same depreciation allowances as a much larger, more expensive property.
Why? Well, there are three main reasons.
- Wet areas. No matter what type of property you own, every property needs a bathroom and kitchen. These areas are more expensive to build than bedrooms and so this means that the construction cost as a ratio is higher in a smaller apartment than an apartment with more bedrooms.
- White goods. Brickwork and concrete depreciate at slow rates compared with white goods such as dishwashers, microwaves, washing machines, refrigerators etc. And if you have more space, the effectiveness of these highly depreciable items is reduced.
- Land Value. There is only so much building you can fit into a block of land and the cheaper the property price the better your construction cost to purchase price will generally be. Of course there are exceptions to this but its an important consideration.
So, when you are out at open inspections next weekend, make sure you do some number crunching on our depreciation calculator beforehand or via our smart phone App to compare depreciation allowances between higher priced bigger apartments and smaller ones.
We're happy to answer any questions about depreciation ratio so please send us an email.