Pradeep’s Investment Strategy: A Case Study
Pradeep, an astute investor, recognised the value of maximising depreciation benefits in his property investment. With careful consideration, he opted for a new apartment, knowing that new properties offer significant advantages in depreciation deductions, particularly with higher-value plant and equipment assets.
As an added bonus, Washington Brown already had the costs for the apartment block that Pradeep bought in, therefore we didn’t need to complete a property inspection and he also saved on the cost of his depreciation schedule service.
Pradeep’s Story
“As a property investor, I’m always looking for ways to increase my cash flow and maximise returns, so I knew that getting a tax depreciation would be a key tool in my investment strategy. Buying any property can be quite stressful, property conditions, financial pressures, and legal complexities are all factors that need to be taken into consideration.
When I purchased my new apartment, one of the main things I considered was the significant depreciation benefits that come with new properties.
When researching quantity surveying firms who could provide a depreciation schedule, I ensured the company was reputable and had a large portfolio. After doing my research, I decided to work with Washington Brown, and I’m so glad I did. Since they already had the costs for the apartment block I bought into, I didn’t even need a property inspection, which not only saved me time but also reduced the cost of the depreciation schedule service.
Thanks to their professional expertise, I was able to maximise my claims and improve my overall cash flow from a weekly loss into a small profit. The entire process was smooth, efficient, and well worth the investment. I’d highly recommend Washington Brown to any property investor looking to get the most out of their depreciation benefits.”
Pradeep – Washington Brown customer
Property Profile:
Pradeep’s investment was a new apartment boasting two bedrooms, two bathrooms, and spanning 74 sqm. Built in 2020, he purchased the property for $559,000.
| Property Type | New Apartment |
| Bedrooms | 2 |
| Bathrooms | 2 |
| Internal Area | 74sqm |
| Build Year | 2020 |
| Construction Cost | $559,000 |
Depreciation Benefits:
In the first year of ownership, Pradeep was able to claim $15,000 in depreciation, leading to substantial tax savings of $5,882. Over the property’s lifespan, the total depreciation claim could amount to an impressive $329,650.
| 1st Year Claim | $15,000 |
| 1st Year Tax Savings | $5,882 |
| Total Claim | $329,650 |
Financial Impact:
To illustrate the financial impact of Pradeep’s depreciation strategy, a comparison was drawn between scenarios with and without claiming depreciation.
| With Depreciation Claim | Without Claim | |
|---|---|---|
| Rent received at $660 per week | $34,320 | $34,320 |
| Interest (6% of 80% borrowing of $559k purchase price) | -$26,832 | -$26,832 |
| Other expenses (property management, rates, etc.) | -$8,385 | -$8,385 |
| Cash outlay before depreciation (a) | -$897 | -$897 |
| Depreciation Year 1 | -$15,000 | $0 |
| Total tax loss | -$15,897 | -$897 |
| Tax Refund @ 37% (b) | $5,882 | $332 |
| Annual profit/loss to own property = (a + b) | $4,985 | -$565 |
| Weekly profit/loss to own property | $96 | -$11 |
Conclusion:
Pradeep’s investment success highlights the importance of strategic decision-making in property investment. By choosing a new apartment and leveraging depreciation benefits, Pradeep was able to enhance his cash flow and overall profitability. For investors seeking to optimise returns and minimise tax liabilities, investing in new properties with substantial depreciation potential proves to be a lucrative strategy in the realm of real estate investment.