A lot of people buy property when interest rates go right down. Like now, there are a lot of people buying because interest rates are low. Everyone goes out and buys and that creates more demand as well. And who would not want to buy if you can lock in interest rates and borrow at 5% for five years?
But for me, I don’t want to rush. Sometimes I tend to sit back and wait when the market is hot. I’ve learned that sometimes being patient with your money is good. You don’t have to buy something every year. It might be better to save up for 10 years and then come and pounce when other people are not in the market.
Sometimes when the rate goes up to 9% and no one can afford to buy, I’d rather buy then and have enough money and not have to worry about having a big debt or fighting with other investors. You don’t want to be in so much debt when rates go up again.
I don’t want to buy when there are 100 people going to auction against me. I’d rather buy when there are not a lot of buyers.
Building insurance valuations Sydney wide is not something to leave to speculation. As experts in the construction and building industry, we know there is a big difference between a market valuation and the actual costs of reconstruction. A comprehensive building insurance valuation report will ensure that in the event of an insurance claim you are not left out of pocket.
At Washington Brown, we base our building insurance valuations on the full cost of rebuilding, in the event of total destruction. We don’t do this so you’ll pay a higher insurance premium. We do it to protect your investment. Our building insurance valuation report will outline costs for demolition, site-clearing, professional fees, compliance and reconstruction.
Property: Office and storage building
Description: 8 levels above ground comprising inner city storage facilities and office suites with 1 level of basement parking
Age: Built in the 1970s
Location: Melbourne Central Business District, Vic.
In 2009, we were approached by a large property management company to assess the replacement cost of a building that had been newly acquired by one of their major clients. The assessment had already been completed in pre-acquisition stage by a well-known property valuation company, together with their valuation report.
Note that the valuation documents, or any particulars they contained, were not disclosed to us prior to our report preparation. We did not know the purchase price of the property either as the buyer did not want to disclose it at the initial stage.
After reviewing all the documentation provided, and consulting with the property manager, we carried out a detailed inspection. It was in the heart of the city so we scrutinised the accessibility and adjoining buildings which have a major bearing on city construction.
We released our assessment with a recommended amount for the replacement of the building of $30 million. We received a phone call within one minute. The conversation went along the lines of, “There must be a mistake? The client only bought the property for $13 million. The valuation report recommends a replacement value of the building to be $7.5 million. Surely there cannot be such a difference?”
We dissected the report with the property manager and went through all the components that may have caused such a difference. Some of the issues were:
All available assessments in the past until the valuation report, had been based upon a generic index with no consideration of the original source until now
The valuation assessment considered the building cost to be proportional to the assessed market value and in line with previous insured amounts.
The lessons learned were:
Never rely on a previous insured amount, as it could be based on indexing for the last 30 years
Market value should not be considered a proportion of the replacement cost, which in this case was further exacerbated by the brief downturn in the office property market
The overall cost-per-square-metre was unrealistic upon analysis. It would have only built a simple factory out in the suburbs.
Needless to say this client is still with us today.
A schedule of condition Report details the existing condition of a building at a specific point in time, which is usually used when leasing, purchasing or updating property assets or when there is a change of ownership.
It is an item-by-item account describing the elements of the building and their condition and it is recorded in a written report with photographic evidence.
Schedule of condition reports are particularly important to commercial and industrial tenants as usually commercial and industrial leases will stipulate that the tenant is responsible for repairs at the end of the lease.
A schedule of condition report, signed and incorporated into the lease prior to signature, will help to reduce your legal liabilities and minimise make good risk at lease termination.
The main purpose of a schedule of condition is to:
Record the condition of a building at a particular point in time
Limit the liability of the tenant, with regard to the current condition of the property at the time of occupation
Show an accurate assessment of the building condition at lease commencement, to limit and determine the make good claims on termination of the lease
Identify damage or issues with an existing building which can be then used to assist with maintenance of the asset.
Property Type: Industrial/ Storage
Property Size: 4,000m2
Location: Western Sydney
A private landlord contracted Washington Brown to undertake an ingoing schedule of condition of an existing industrial and storage facility located in Western Sydney.
The client required a professional ingoing schedule of condition be carried out prior to him signing the lease, to record the existing condition of the building. It would then form part of the lease agreement and be used in the make good at lease termination, in the event of any dispute. The inspection was carried out within five days of us receiving instructions and the report was issued within the client’s timeframe of five days.
In consultation with the client, we identified their requirements and the extent of the schedule of condition. We did a thorough internal and external inspection of the premises and identified all existing defects/damages within the building. Then we produced a detailed report which outlined the element description and condition of the building. The report also included photographs to identify and support the issues raised.
The client was very satisfied with our reports and findings. They were able to negotiate that our report be included in the lease agreement, therefore minimising their risk in case of any dispute.
Our independent assessment gave the client a solid foundation and the peace of mind that in the event of any future dispute, they have a legally-sound document that will make the settlement quicker.
Learn more about a schedule of condition report here.
Fancy a villa in Tuscany, what about a Condo in LA or Loft apartment in New York? I do!
But can I claim depreciation on this property… The short answer is yes!
The main difference, however, is in regards to claiming the building allowance – that’s the wear and tear on structural elements of the property like bricks and concrete.
With Australian properties you’re entitled to claim 2.5% of these construction costs per annum, as long as the property was built after July 1985. The rate for overseas properties is the same – but the date is different. Construction of an overseas property must have commenced after 1990.
So if you want to maximum your depreciation benefits on an overseas property, look for a newer property built in the last decade or two. Internal items like carpets, ovens, lights and blinds – can also be depreciated, as you would with an Australian property. This is often referred to as plant and equipment.
A good place to start your research is on the ATO’s website. You can download a publication called Tax Smart Investing: What Australians Investing in Overseas property needs to know.
Like any property investing, you’ll need to do your homework, research the local market, find out about rental yields and occupancy rates. but the best thing is – this can all be done on-line these days.
The main barrier to depreciating an overseas property is working out the constructions costs, along with the expense of flying a quantity surveyor overseas.
Washington Brown has a number of affiliations around the world. We regularly inspect properties in London… New Zealand… I even did an inspection in Koh Samui (Thailand) recently.
Here’s a video I created about claiming depreciation on overseas property, I hope you enjoy.
So there you have it. You can still invest in overseas property and reap the benefits of the Australian Tax system’s depreciation laws. But remember, the property must have been built or renovated after 1990.
If you need a depreciation schedule for your investment property – get a quote here or let us prepare an estimate of the likely deductions available to you – just submit your property for a free review here. Start claiming depreciation on your overseas property today!
5 Stars - Based on 278 User Reviews
I think the communication from Washington Brown has been really impressive. All consultants have been really patient with me - as a first time investor I have really appreciated their extra support.
Quick turnaround, very responsive and helpful with completing schedule even though I was missing some information they were able to locate what was required. I have used Washington Brown on three occasions in all three times the service was very good and would highly recommend them.
First time using washington brown, was referred by my accountant. They have a very fast turn over and their staff are very polite. Will very happily refer friends and family to them and be back if we need anything else.