THE RECENT announcement that Brisbane has a real possibility of hosting the 2032 Olympic and Paralympic Games, being named as the preferred bidder by the International Olympic Committee, may have property investors wondering if they will find themselves on the winners’ podium if they buy in this city.
Should you rush in and buy, with the idea of capitalising on future growth?
The simple answer is that the Olympic Games shouldn’t be your only reason for buying. Hosting the event could benefit the city in many ways, which could flow through the property market, but it won’t directly drive prices up.
How will Brisbane benefit?
Under the ‘New Norm’ rules of the Olympic Games, cities that win the bid for the event should have the majority of venues already existing so white elephant stadiums that will likely never be used again don’t have to be built, and hosts can focus on ‘legacy’ projects such as public transport, instead.
This is the case for Brisbane, with Queensland Premier Annastacia Palaszczuk saying the city already has 85% of the venues required for the Games, and events may not be restricted to Brisbane, but South East Queensland and even further afield in the state.
The masterplan for the Olympic Games’ bid proposed two athletes villages (one potentially at Hamilton North Shore) and a possible new stadium at Albion, as well as public transport projects.
It’s hoped that the opportunity to host will be used to bring forward infrastructure investment in Brisbane – particularly for rail and road – to cater for the city’s growing population, with the budget of $4.5 billion contributing to these projects.
This in itself will be a huge boost for Brisbane, making it more liveable and attractive. But another benefit of hosting the Games will be the economic boost through infrastructure projects, job creation and tourism.
The bottom line is that hosting the 2032 Olympics could really put Brisbane on the world stage, with the city to become instantly recognisable and a sought after destination to both travel and move to for a long time to come.
Will it lead to a property boom?
The benefits of hosting big sporting events such as the Commonwealth and Olympic Games can flow through to the property market, and in turn, give it a boost, but there isn’t evidence of a direct boost to the property market in a city hosting one of these massive sporting events.
Some studies show there is a boost in host cities’ housing markets in the years following the event being held, but it’s not conclusively due to the event itself.
“If Brisbane hosts, for many years there will be people saying ‘we want to go to Brisbane or South East Queensland, because that’s where the Olympic Games were held’, says Property Investment Professionals of Australia Chairman Peter Koulizos.
“It attracts tourists before, during and after the Games, which has got to be good for Queensland, but not to a level where you can say property markets are going to boom, because it hasn’t happened before.
“There are certainly a lot of good things, but to be able to drill down to say ‘these particular suburbs are going to do well’ is not possible – it doesn’t have that sort of benefit.
“The research doesn’t show that you should buy in a particular suburb because the stadium is next door and you’ll make money, for example.
“It’s wonderful and the Olympics will have a greater effect city wide, but it doesn’t impact property prices from a suburb level.
“It didn’t happen for the Olympic Games in Sydney, the Commonwealth Games in Brisbane, Melbourne or the Gold Coast, and globally that sort of thing doesn’t happen.”
The reality is that Brisbane is already starting to boom, which is part of an Australia-wide trend for the property prices. The city was also overdue for growth as it has matured in recent years with billions of dollars in infrastructure projects in the pipeline that will be transformational for the city, and has seen significant population growth.
The potential promise of hosting the Olympic Games in 2032 will just increase confidence in the city’s property market, and perhaps put the city on the radar for some investors, both locally and globally.
While the Olympics may draw investors to Brisbane to buy property, investors should always stick to the fundamentals when choosing cities to buy in, and where to purchase on a suburb level in those cities.
Always ensure there will be ongoing buyer and renter demand, and that it ticks all the boxes in terms of infrastructure, amenity, proximity to employment, and accessibility.
In Brisbane, the best opportunities are close to the city and close to the river, says Koulizos, where there will always be strong demand.
If you do end up buying Brisbane make sure you order a property depreciation schedule here.
AS WE reach the end of the year it seems Australia’s property market has been heating up, with greater sentiment, activity and price growth.
The latest CoreLogic figures show the market continued its recovery in November, with prices rising for the second month in a row. Dwelling values rose by 0.8% over November and 0.4% in October, following five months of falls resulting in a total 2.1% drop in values between April and September.
The question is now, what will happen in 2021? Will the market strengthen, or will it resume a downward trajectory when some of the COVID assistance packages come to an end?
All signs point towards growth
CoreLogic’s Head of Research, Tim Lawless, says Australian home values could surpass pre-COVID levels early next year if the current growth rate continues.
Housing values already hit record levels in Brisbane, Adelaide, Hobart and Canberra in November.
While some commentators are still hesitant, many experts believe the price growth we have seen at the end of 2020 is predicted to continue into next year.
Some forecasts for growth rates are more bullish than others, but Hotspotting.com.au founder Terry Ryder predicts a national property boom next year.
He says Australia’s real estate market has “done brilliantly” this year considering COVID-19, and has completely defied earlier forecasts of price falls.
“In March and April, economists and media headlines were telling us to expect a collapse in property prices,” he says.
“Some were forecasting a 15 to 20 per cent fall, and the worst case scenario was a 30 per cent drop, but we haven’t seen that, and I don’t think we were ever going to see that.
“Most locations across Australia have continued to show price growth month by month, with Sydney and Melbourne the exception, but they are often the exception to the national rule.
“Even those markets are now starting to get positive numbers, but most other capital cities and regions have had growth right through.
“I think we’re coming into a national property boom. I think next year is going to be incredibly strong economically and in real estate.
“We’re really going to be having the first genuine nationwide property boom since the start of the century.
The market hasn’t had double digit growth since the start of the 2000s, he says, and in 2017 Sydney and Melbourne were really the only cities to boom.
“But next year we’re going to see all the capital cities and most of the majority regional centres having strong growth,” adds Ryder.
SQM Research is also forecasting strong annual growth of up to 12% in most capital cities next year, with Perth leading the forecast with predicted growth of between 8% and 12%.
Meanwhile many of the banks have backflipped on their doomsday predictions for price falls, and revised their house price forecasts for 2021 upwards.
Westpac, for instance, predicted a 10% fall in prices between April 2020 and June 2021, but is now forecasting a 5% fall, with prices to rise by 15% in the two years from June 2021.
NAB, which predicted falls of between 10% and 15%, is expecting prices to rise by 5% and 6% respectively across the board in 2021 and 2022, while ANZ predicts price rises of around 9% across the capital cities next year, revised upwards from a fall of 10%.
All signs point towards growth
So what’s underpinning Australian real estate prices now and moving forward into 2021?
There are many factors, including a shortage of stock, with the resulting buyer competition for available properties pushing prices up.
“Properties are selling so quickly; what’s available is getting snapped up,” says Ryder. “People are offering strong prices to snap property up in the face of competition.
“It’s a vendor’s market but there are relatively few taking the opportunity, which is one of the factors keeping prices strong, but not the only one.”
Low interest rates is another factor, as well as the economy. Ryder explains that Australia was in and out of recession quickly, and the economy is strong, with unemployment failing to reach the highs predicted, and currently sitting at around 7 per cent.
Many have predicted the market may feel the worst pain when government and lender assistance packages come to an end, but Ryder says that’s not going to come to fruition – if it was going to happen, it would have already, he says.
It’s business as usual in most parts of Australia, notes Ryder, with the majority of the country getting the virus under control very quickly.
People are now confident and spending, and there has been no massive economic hit. In fact, he says some parts of the economy have thrived because of COVID-19 and some property markets were directly pumped up because of it, with some regional economies turbocharged by it.
Recent data has found consumer confidence in Australia has hit a 10-year high, with the most recent Westpac-Melbourne Institute Index of Consumer Sentiment lifting by 4.1% to 112 in December, up from 107.7 in November.
Some forecasts of property price crashes pointed to falling overseas migration in Australia, but Ryder says this demand is now being replaced by expats coming home in “droves”.
The fast-tracking of infrastructure in Australia to aid the economic recovery will also be a big boost for the property market by boosting economic activity and jobs, as well as improving the appeal of specific locations, adds Ryder.
“Nothing bumps up property markets like infrastructure spending; it’s going to be huge for the property market,” he says.
“That factor is almost going to guarantee that across Australia there is going to be a real estate boom in 2021.”
When it comes to deciding what to do with your hard earned savings, the choice between investment opportunities can be difficult. There are a number of factors that might convince a potential investor to invest in one opportunity over another.
In particular, property as an investment is something that has been extremely profitable for a number of people. With this being said, in deciding whether or not you should buy property as an investment, you should consider various factors.
The Risk Involved in an Investment in Property
An important factor in determining which investment suits your needs is the amount of risk you are willing to take. While some investors are extreme risk takers and like to put more of their investment towards something volatile such as cryptocurrency, others are more risk averse, and prefer to accept a lower return on investment with known risks as opposed to unknown risks.
In comparison to other investment opportunities such as crypto and shares, investing in property is relatively safe. With this being said, it doesn’t mean that there is not the potential for you to lose your investment. When considering the 2020 pandemic in particular, risk surrounding property is somewhat higher than it would otherwise be.
Volatility due to the pandemic has meant that Australian housing prices have dropped, open houses and auctions have been halted, and rent reductions have occurred. This might mean that you are tempted to invest, in anticipation of future price rises, however the pandemic also means that future price changes are uncertain.
Being Prepared to Pay it Off
One of the biggest considerations to make in deciding to buy a property as an investment is in terms of whether you are prepared to make the necessary repayments. These will likely take a significant chunk out of your regular income, while other investments do not require the same commitment.
Rent money will obviously contribute to these repayments, however it won’t cover them entirely. Plus, in the event of a vacancy (which is likely to happen at some point), you’ll be covering these repayments entirely.
If you are planning on putting down a deposit and making repayments on a property, you’ll want to know how much you will be paying on the mortgage – calculate it here.
Investing in a Property to Maintain Your Lifestyle
In many situations, investing in a property is often an alternative to buying a first home. If this is the case, this decision will involve a lot of thought in itself. However, a significant factor that increases the appeal of investing in a property is that it can allow you to maintain your current lifestyle.
Purchasing a property in an area you want to live in might be out of your financial means – if you want to live in a trendy area with parks, amenities, cafes, shops and entertainment, the cost of the property will be higher. Investing in a property can solve this problem as you can choose to invest in an area that is cheaper or more rural, and then continue to rent in the area you want to live in.
Don’t Overlook Maintenance, Upkeep and Management Requirements
Another factor that makes buying an investment property an involved process is the maintenance and upkeep involved.
This starts with the tenants – choosing the right tenants can be a difficult process, and one that is often ongoing. The right tenants need to take care of the home properly, be a positive contribution to the neighbourhood (you don’t want to be receiving complaints from neighbors), and make payments in a timely manner. Finding the perfect tenant is easier said than done, and depending on how long they plan on living in your property, you might be screening the next occupants sooner than you would like.
Regardless of the tenants, there are going to be maintenance requirements. Even the perfect occupants will come into some sort of maintenance requirement, whether it is to do with plumbing, the kitchen, or the general structure and quality of the property. Having to determine whether this is the fault of the tenants or not is another problem in itself, but ultimately you may end up having to pay for these maintenance costs.
Finally, you have to deal with the management of the property in general- this means taking the time to deal with the processes involved in finding tenants, performing upkeep, keeping neighbours happy, and more. On the other hand, you could enlist the help of a professional property manager – this is a more costly but convenient option, and will depend on your timetable, income and personal preference.
THE FEDERAL Government has made a very significant change to capital gains tax (CGT) affecting ex pats, but it’s likely there are many Australians living overseas who are still completely in the dark about it.
Put simply, the change entails the CGT exemption for the Australian family home, which has been in existence for 35 years, being taken away from expat – or non-resident – Australians if they sell the property while living overseas.
Currently the exemption applies so long as the home was rented out for no more than six years at a time, but from July 1 this year the new changes will take effect.
What are the changes?
The change to CGT means expats seeking a principal place of residence exemption must sell before June 30 or hold the property and wait until they return home to live in it again before selling. If they don’t, they risk paying a potentially hefty CGT bill on their home.
If the property was purchased before May 9, 2017 expats can sell before June 30 this year and avoid CGT, but if the property was purchased after May 9, 2017 and sold while living overseas CGT will still have to be paid, as there is no principal residence exemption.
The legislation, which seems to have been rushed through after both political parties previously promised they would exclude expats from the changes as it was unfair, will also apply retrospectively.
That means capital gains will be taxed for the entire time the property has been owned, rather than just for the time the occupant has lived overseas, which could become very expensive for those that bought their properties as far back as 1985, with property prices having risen very significantly.
The changes to CGT will also affect migrants who buy a home in Australia to live in while they are here, and then sell after returning home.
What impact will the change to CGT have on expats?
The change will only affect expats who sell a home in Australia they have previously lived in while they are living overseas.
It’s difficult to determine exactly how many expats will be impacted, but it could be tens of thousands to hundreds of thousands.
And then there is not only current expats to consider, but those moving overseas in the years to come, particularly in an increasingly global economy where many people are going abroad to work.
Those that are affected will be significantly disadvantaged. Experts agree it’s an unfair tax to drop on Australians who have purchased in good faith, believing their home would be exempt from CGT, and continued to contribute to the Australian economy through taxes on their homes if they are rented out.
It should be noted that there are some concessions for the application of CGT to the homes of expats selling while overseas, with an exemption applying for life events such as a terminal medical condition, death or divorce.
What should expats do?
It appears this change to CGT has been brought in without much fanfare to even alert expats of its existence.
There will likely be many people caught unawares and potentially sell while overseas without realising the tax laws have changed, incurring a significant CGT bill.
If you’re an expat, the first thing you need to do is get educated on the change in the CGT rules, and then determine the best course of action for your circumstances.
You’ll need to do so quickly, with the deadline to sell (the contract date) being June 30 this year.
It’s a good idea to seek professional advice on the costs involved in your circumstances and whether you’re better off holding or selling.
Impediments to waiting until you return home include that your move may be permanent, you may be unable to hold the property financially, or you may be returning to a different city than the one which you left.
For those returning, you must be genuinely returning to Australia and can prove that you have quit your overseas job, cancelled a property lease and taken your children out of their overseas school, for example.
For those who do have to pay CGT, there could be issues in determining the correct tax liability because those who have purchased up to 35 years ago may not have kept proper records.
Capital gain is calculated using the original cost base, which includes expenses related to the property purchase such as buying costs, holding costs and renovations, as well as the cost of the property itself.
This may lead to expats selling their home while overseas being charged more CGT than they would have, if the proper records had been retained.
WHAT A rollercoaster the past year has been for property!
We saw a lacklustre start to 2019 largely due to apprehension around last year’s Federal Election and particularly proposed housing-related tax policies from the ALP.
Activity was also subdued due to the fallout from the Banking Royal Commission and tightened lending restrictions imposed by the Australian Prudential Regulation Authority.
However following the Federal Election in May and confirmation the status quo would continue the market slowly started improving as confidence returned, and now it’s firmly in recovery mode.
The difference between the start of 2020 and the same time one year ago is like “chalk and cheese”, says Hotspotting.com.au founder Terry Ryder.
“One year ago everything was super negative but now things are much more positive,” he states.
But just how positive is the market? Will the price growth that started in 2019 continue this year, and if so, will it be at a strong pace?
Let’s first look at why prices have started to rise again…
In the wake of the uncertainty in the property market over 2019 many sellers decided to hang onto their homes, fearing they wouldn’t get the desired price, and construction also eased.
This led to a lack of available stock for buyers to choose from, which Ryder says was one of the several factors contributing to the price growth that started towards the end of the year and has continued into this year.
“One of the factors in the escalation of prices, particularly in bigger cities, was that at a time when demand recovered quite strongly, there was very little supply and vacancies were generally low in most locations around Australia,”
“There was a lot of competition for good properties available, which was a big factor in price growth last year.”
Now, in 2020, there are signs supply is starting to rise, with sellers more confident in testing the market, and more construction in the pipeline, so price inflation that occurred due to a lack of stock will likely be tempered moving forward.
National residential property listings increased in January by 2.2%, according to the latest data from SQM Research. All capital cities saw a rise in listings, but the largest rise was in Sydney of 5.1%, followed by Hobart at 4.9%.
Sydney’s listings are still 24.8% lower than 12 months ago, while nationally listings are 10% lower than a year ago. But there are likely to be further increases in the coming months.
Dwelling approvals are also improving, with annual growth lifting to 2.7%, the first positive since June 2018.
“Markets are rising and people can get pretty good prices for their properties if they’re willing to list them,” says Ryder.
“Consumers were a bit battered and bruised after a period of negativity, including fears of the Federal Election, but since the middle of May last year there have been a series of fortunate events.”
These events include an easing of lending restrictions, tax cuts, three interest rate reductions and more positive media coverage on the market.
“There are always multiple factors in why the market rises and these factors are all part of the equation,” says Ryder.
“But with more supply coming to the market this year, it will take some pressure off prices, particularly in Sydney and Melbourne.
“The market will settle down a bit and be what you might call a ‘normal’ market.”
Indeed, the latest CoreLogic Home Value Index found that while property prices rose across every capital city in January, the rate of growth had slowed in recent months.
Over the past year prices have grown by 4.1%, which is the fastest pace of growth for a 12-month period since December 2017, but in January the index was up by a total of 0.9%, down from its recent monthly peak of 1.7% in November.
Growth markets are aplenty this year
With Sydney and Melbourne likely to take a backseat this year, smaller capital cities are set to come to the fore, including Brisbane, Perth, Canberra and Adelaide.
“Sydney and Melbourne have had substantial and lengthy booms, and the increase in supply and the affordability factor will tend to suppress the level of growth in those cities,” says Ryder.
“Cities that haven’t had a big run but have the right dynamics in play will have a strong year.”
Brisbane is overdue for growth, and all the ducks are starting to fall into line for the city to do much better this year, explains Ryder.
“All indicators are that Perth has finally moved into a recovery after five years of gradual decline and Canberra looks solid, underpinned by one of the steadiest economies in the country.
“Adelaide is always underrated; it’s got a lot more going for it than people realise and it will have a good year as well.”
Hobart has had a good run and is likely past its peak, and Darwin is still struggling, adds Ryder.
He points out that regional areas also have the potential for growth this year, with the strongest market being regional Victoria, with parts of regional New South Wales also looking promising, including Orange, Wagga Wagga, Goulburn and Dalby.
In regional Queensland the Sunshine Coast offers some of the best growth potential, with a strong economy, while some parts of Central Queensland are also recovering, including Mackay.
The recent depreciation changes have the greatest impact on the types of property you may choose to invest in. Some people prefer to invest in brand-new properties, while others opt for older property that they can renovate and resell for profit. So, which is the better investment strategy? Let’s look at this in actual finite details. If you look at Table 5.1 below, you’ll see the net effect of the cost of owning a property broken down into three examples:
a brand-new property;
a property built between 1987 and 2016; and
a property built before 1987.
At the time of writing this book in 2017, the middle column is 2016 because it’s one year prior to the current year. This highlights that the property is second-hand and you will be acquiring previously used assets if you purchase it now. If you’re reading this in 2019, the middle column will be 1987 to 2018; one year less than the current year.
The assumptions are the same for every property: each one will generate a weekly rental income of $700 over a 52-week period, which works out at $36,000 per property. Furthermore, the interest rate is 5.5 per cent on each property on borrowings of 80 per cent of the purchase price – that’s an annual interest bill of $33,000 which is the same to illustrate the net effect on depreciation. Each property will have other expenses at 1.5 per cent of the purchase price, which makes $11,250 annually for each property. Now, you could argue that property built before 1987 could have higher expenses, but for ease of comparison we’ve kept the same rate. So, it’s the same scenario for each property with the net outlay before depreciation of $7,850. Now, here’s where things get interesting, what about the depreciation?
In a brand-new property, the depreciation in year one is $15,000;
For the property built between 1987 and 2016, it’s $4,000 because all you claim there is the structure of the building; and
For a property built before 1987, the depreciation is $0.
Depreciation on a brand-new property
You can see that the total tax loss on the brand-new property is quite high at $22,850. If you are an investor who is paying tax at a marginal tax rate of 37.5 per cent and you’re making a loss of $22,850, you will receive a tax cheque back from the ATO to the tune of $8,455 – and that’s cash in hand. However, you have physically paid out $7,850, remember? You’ve been paying $605 a year to own that property – so the net return is $12 a week positive cash flow.
Depreciation on an old property
Next, let’s look at the property built before 1987. Again, you have physically paid out $7,850 over the year to hold the property. You can’t claim any depreciation on your investment, so the total tax loss continues to be $7,850. If you are in the 37 per cent income tax bracket, there will be a tax return of $2,905. Given that $7,850 has been paid out and there’s a tax cheque of $2,905, it’s cost you roughly $5,000 per year to own. That’s just under $100 per week to own a property built before 1987.
Depreciation on a second-hand property built between 1987 and 2017
Using the same variables, if you bought a property built between 1987 and 2017, your annual tax loss would be $11,850, so you would receive a tax refund of $4,385 (providing you are in the 37 per cent bracket). Your cash outlay was $7,850, so your annual cash outlay is $3,465. That means your weekly cash flow is negative $66, but you’ll still eventually realise a capital gain over the medium to long term. As you can see, there are pros and cons of buying brand-new and almost-new properties, depending on your investment strategy. Furthermore, buying brand-new property often carries the developer’s profit, which you pay for in the purchase price. If you buy something ‘newish’ – say a five to ten-year-old property – there is a fair chance that it has been bought and resold a few times. Therefore the value is now reflected in a more realistic way on the open market.
Property depreciation is a legal tax deduction related to the ‘wear and tear’ of an investment property over time. A tax depreciation schedule outlines the deductions you may be entitled to claim each year of ownership on the Building Allowance (the structure itself including bricks, concrete, etc.) and, if eligible, on the Plant and Equipment items (internal items like ovens, carpets, blinds, etc).
As with any tax deduction, claiming property depreciation reduces your taxable income. That means more money in your pocket to reinvest or to spend on yourself or on your family.
A depreciation schedule from Washington Brown is a fully-comprehensive, ATO-compliant report that helps you pay less in tax. The amount the depreciation schedule says you can claim effectively reduces your taxable income because it’s taking into account how much it costs you to own and maintain the property.
While you may be used to claiming on such items as council rates or property management fees where you have paid money towards an item or service, depreciation is a “non-cash deduction.” This is because it’s the ONLY deduction that you don’t have to pay for on an ongoing basis – its already ‘built’ into the purchase price of the property.
If you’ve purchased an investment property, request a free quote for a fully comprehensive, ATO-compliant depreciation schedule today and save.
If you’re looking to invest in real estate, commercial properties present plenty of opportunities. However, you need to consider the risks and market drivers. This commercial property investment guide will help you.
You must think about more than the property investment basics when investing in commercial real estate. There are many complex market issues at work, which means you take on more risk.
Understanding these issues will play a role in the success of your investment in real estate. Commercial properties come in all shapes and sizes, which you must account for. This commercial property guide will equip you with the tools you need to succeed.
The Market Drivers
Several drivers affect the state of the commercial real estate market. You must understand what these drivers are before you can invest successfully. They include the following:
The strength of the economy. A weak economy means there are fewer businesses available to lease your property. Keep an eye on the data. For example, transport sector growth indicates that an economy is getting stronger.
Infrastructural improvements influence businesses’ decisions. For example, the building of new roads usually results in an influx of companies to an area. Buy your commercial property with future developments in mind.
The Reserve Bank of Australia’s (RBA) interest rates have an effect. If interest rates are on the rise, you’ll find less success with your commercial property. The cost of money increases. This places your potential tenants under greater financial strain. Conversely, low interest rates lead to more demand.
Population growth in certain regions will affect your decisions in real estate. Commercial properties do well in areas with large populations. This is because the demand for services increases, which leads to an influx of businesses into the area.
You should also consider population demographics. For example, areas with a lot of retirees will have more need for medical services. However, areas with lots of children need more family-oriented services. Use population demographics to find out about the types of businesses that will express an interest in your property.
There are also several risk factors to consider when you invest in commercial property. Here are some of the most important:
Commercial properties tend to stand vacant for longer than residential properties. You will have to handle the costs of the property during such periods. As a result, it’s usually best to tie commercial tenants to long-term leases.
New property construction always presents a risk to your investment. Your tenants may decide to explore their options, which could lead to vacancies. It’s the issue of supply and demand. The more supply, the harder it is to find tenants. You also won’t be able to charge your tenants as much when there are other options available.
Size is an issue. Large commercial plots cost a lot more to maintain, and are only suitable for certain types of business. Smaller plots may be cheaper, but they also have their limits. You must consider the local demand for services before deciding on the size of your commercial investment.
Infrastructural improvements in other areas represent risks for your established commercial properties. Your tenants may make the move to the new area, which means you lose out. As a general rule, try to invest in properties that are close to central business districts (CBDs).
A poorly-constructed lease could lead to the failure of your commercial investment. These are the factors to consider when creating your leases:
Commercial leases can extend from three years up to 10. The longer the lease, the less risk of vacancy. However, a bad tenant on a long-term lease could cost you. Offer the option to renew if you’re confident in the tenant’s ability to make on-time payments.
Link your rent increases to the Consumer Price Index (CPI).
You may require council approval for some types of business. For example, chemical treatment plants need to have the correct documentation.
Insert a condition that compels the tenants to revert the property to its original condition upon leaving. This will make it easier for you to rent the property out again when you current tenant departs.
What Else Should You Consider?
Further to this, you need to arrange proper financing for your purchase. Many residential lenders can’t help you with commercial properties. As a result, you may have to locate a specialty lender. Furthermore, you may not be able to borrow more than 70% of the property’s value.
You’ll also deal with a commercial agent, rather than a real estate agent. These professionals specialise in attracting the right businesses to your property. They’ll also help you to create attractive deals for potential tenants.
The Final Word
As you can see, commercial investment is a complex subject. This commercial property guide will equip you with the tools you need to succeed.
The team at Washington Brown can also help you to claim depreciation on your commercial property. Contact us today to speak to a Quantity Surveyor.
Cashflow can become a major problem with yourproperty investment. For beginners, slow cashflow could prevent you from building your portfolio as quickly as you’d like. Happily, there are some tricks you can use to make improvements to your investment property cashflow.
So, you’ve got what you think is a great investment property. You’ve followed all theproperty investment basics, but your cashflow is tighter than you expected. At times, it can be a real struggle to pull together the money to pay for the property’s expenses.
This is a common problem, no matter how well you’ve followedinvestment property tips. Beginners, in particular, tend to struggle with getting their cashflow up to the level they’d hoped for.
All is not lost. There are a few tips you can follow to improve your investment property cashflow.
Tip #1 – Raise the Rent
It may seem like a simple tip, but it’s one that many beginners don’t think about when they’re dealing with cashflow issues. Raising the rent on your property can offer a short-term solution while you look at the bigger problems.
Of course, you can’t do this every time you face a cashflow issue. Constant rent increases will drive your tenants away. However, it becomes an option if you haven’t re-examined your rents for some time. In such cases, you may be charging less than other investors in the area.
You must also remember your tenancy agreement, along with the laws of your state. Either may prevent you from raising your rents. That’s why many investors wait until the end of a tenant’s lease period before increasing the rent. With some luck, you can secure the tenant on a longer fixed lease at the new rate.
Tip #2 – Take a Look at Your Home Loan
Do you still have the same home loan you applied for when you bought yourinvestment property? Australia has dozens of lenders who offer hundreds of mortgage products between them. Take advantage of that fact to secure a better home loan.
Work with a mortgage broker to find out what other products are out there. You may find that switching your loan gives you access to lower interest rates and some useful new features.
Alternatively, you could use the information you find as leverage against your current lender. Most lenders want to keep reliable clients. If you’ve made on-time repayments, you may find that your existing lender offers a better deal when you threaten to leave.
Those are some long-term options. You could also switch your home loan to interest-only periods for a short while. This will help you to deal with more immediate cashflow concerns.
Tip #3 – Look at Other Income Streams
Theproperty investment basics don’t always cover the other income streams your property may have to offer.
Take some time to think about how you could use your property to generate more than the rental income.
For example, you could lease the side of the building as advertising space if your property is near a busy road. Alternatively, you could lease out any unused parking spaces. Each offers a little extra income beyond your property’s rental income. Remember, that every little bit can help when you have cashflow problems.
Tip #4 – Examine Your Outgoings
Reducing costs is a crucial part ofproperty investment. For beginners, this means taking a detailed look at your figures. You may find that you’re paying too much for your insurance. Or, you could negotiate a better deal with your property managers.
Many who encounter cashflow issues find that they’re paying too much for various services. You may also be paying for things you don’t need. For example, you could handle some basic maintenance issues yourself, rather than hiring somebody to do it for you.
Again, this frees up small amounts of cash. Nevertheless, you’ll improve your cashflow with each positive change to your outgoings.
Tip #5 – Get on Top of Depreciation
It’s amazing to think about how many new investors don’t think aboutrental property depreciation rates. They don’t investigate the claims they could make on their assets. Instead, they keep plugging away without a depreciation report. Alternatively, they assume their accountants have factored depreciation into their tax returns.
You need a depreciation schedule. If you don’t have one, you’re cheating yourself out of thousands of dollars.
Hire a quality Quantity Surveyor to draft a full depreciation schedule. Your surveyor will ensure you claim the maximum amount over the lifetime of each asset. Furthermore, you’ll learn more about tax compliance in your state.
Your Next Step
You’ll make both short and long-term improvements to your cashflow if you follow these tips. You can handle the first four with the help of an accountant and mortgage broker. However, you need additional help to create a depreciation schedule.
Washington Brown has the answer. Speak to one of our Quantity Surveyors today to get a quote.
An investment property tax deductions calculator won’t always show you everything you can claim. Many leave out the assets that go into a typical depreciation schedule. Here are the things that your tax depreciation schedule must contain.
When it comes to tax, there’s one question you must ask about your investment property: what can I claim?
There are the basics of course. Everybody looks into mortgage tax deduction. Australia is full of financial experts who can help with this issue. You may even find that an investment property tax deductions calculator can do the basics for you.
But what about property depreciation? It’s a type of deduction many investors miss, but it could save you thousands of dollars every year. Others make claims, but do so using the wrong schedule. Again, they end up missing out on thousands of dollars in savings.
You need to call in the experts. No, that doesn’t mean your accountant. Instead, a Quantity Surveyor is the professional you need to create a strong depreciation schedule.
The typical schedule will include the depreciation of capital works and equipment. However, some leave out other, less obvious, assets. Here’s what your depreciation schedule must contain if you’re to maximise your deductions.
You may have chosen a unit or apartment as your first investment property. Australia has several cities, which can make such properties a wise investment choice.
Naturally, you’ll claim depreciation on your unit’s assets. But what about the assets that it shares with other units in the apartment complex? You can claim for your portion of those too, but many investors miss out on these deductions.
Common items include fire extinguishers, air conditioning units, and lifts. You can also claim for ventilation and hot water systems. You don’t get to claim depreciation on the full value of the asset, but even a little bit can help with your cashflow.
Item #2 – Scrapped Items
Let’s assume you’ve carried out some renovations on your property. Oftentimes, you’ll have a bunch of assets left over that you no longer have a use for. Many just throw such items away, without giving them a second thought.
That’s a mistake. Old items have what’s known as a scrapping, or residual, value. This is the item’s value once it’s reached the end of its use.
You can claim a final depreciation sum on any items you intend to throw away following renovations. Such items include old appliances or carpets. Have a Quantity Surveyor create a new depreciation schedule prior to your renovations. This will ensure you catch any assets with scrapping value.
Item #3 – Common Outdoor Items
Let’s come back to shared items. It’s not just the common indoor items you can claim depreciation on. Any common items outside the apartment block itself have value to you as well.
This includes pathways, fences, and various landscaping items, such as pergolas. You may even be able to make claims on a shared swimming pool.
However, you can’t claim for all common outdoor items. For example, turf and plants won’t find their way into your depreciation schedule.
Item #4 – The Fees You Pay to Design Professionals
Did you realise that you can include the fees you pay to design and construction professionals in your tax deductions? Australia offers plenty of opportunities to build your own property. Investors often go down this route, rather than buying an existing property.
Your depreciation schedule must account for the costs of such construction work. This includes the money you paid to any designers or architects who worked on the project.
Make sure you supply your Quantity Surveyor with accurate receipts for these services. This will allow you to maximise your claim for the fees you pay.
Item #5 –Money You Pay to the Council
You may have to pay fees to the council for various services. For example, there are costs involved with lodging application fees, or getting council permits.
If you’re building your own property, you may also have to spend money on infrastructure. This might include gutters and footpaths.
Your depreciation report should include all these items. Again, this is something that many investors miss out on because they don’t think the costs relate directly to their properties.
The Final Word
Check your depreciation report again. Does it include all the items on this list? If not, you’re missing out on several Australian Taxation Officer (ATO) tax incentives for homeowners.
You need the help of Washington Brown to create an accurate tax depreciation schedule. Call us today to speak to one of our Quantity Surveyors about your property.
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