Meet Jenny: A Real Investor’s Story

Jenny didn’t have a huge amount of money to invest but wanted to get her foot on the investment property ladder and make the most of the demand for rental properties. She also wanted to explore ways to maximise her returns while ensuring steady cash flow, especially in the crucial early years of her investment.

Her solution?

Investing in a granny flat on her property and strategically claiming depreciation to bolster her cash flow. This solution of a granny flat suited Jenny due to it being nearly half the price of an investment property but she was still able to rent it out for the same amount.

Floor plan of granny flat

Property Overview:

Jenny’s investment was a granny flat boasting two bedrooms, one bathroom, and spanning 59.72 sqm. Constructed in 2023, the granny flat came at a construction cost of $144,000.

Property Type Granny Flat
Bedrooms 2
Bathrooms 1
Internal Area 59.72sqm
Build Year 2023
Construction Cost $144.000

Depreciation Claim Summary

In the first year alone, Jenny was able to claim $9,000 in depreciation, resulting in significant tax savings of $3,330. Over the investment’s lifetime, the total depreciation claim could amount to a substantial $144,000.

1st Year Claim $9,000
1st Year Tax Savings $3,330
Total Claim $144,000

Financial Comparison:

To illustrate the impact of depreciation on her investment’s cash flow, Jenny compared scenarios with and without claiming depreciation.

With Depreciation Claim Without Claiming
Rent received at $450 per week $23,400 $23,400
Interest (6% of 80% borrowing of $144k construction cost and $300k land cost) -$21,312 -$21,312
Other expenses (property management, rates, etc.) -$4,320 -$4,320
Cash outlay before depreciation (a) -$2,232 -$2,232
Depreciation Year 1 -$9,000 $0
Total tax loss -$11,232 $2,232
Tax Refund @ 37% (b) $4,156 $826
Annual profit-loss to own property = (a + b) $1,924 -$1,406
Weekly profit/loss to own property $37 -$27

Conclusion:

“Investing in a granny flat on my property was a big decision, and I was definitely nervous about it at first. However, working with Washington Brown tax depreciation specialists made a world of difference. Their expert advice and guidance on tax depreciation claims significantly improved the cash flow of my investment, especially in the early days when every bit of help was crucial. The team was professional, knowledgeable, and incredibly supportive throughout the process. I’m delighted with the service I received and would highly recommend Washington Brown to anyone looking to maximize their investment returns!” — Jenny

Jenny’s experience demonstrates the tangible benefits of claiming depreciation on investment properties, particularly in the case of granny flats. By strategically leveraging depreciation, Jenny not only reduced her tax liabilities but also boosted her cash flow, ensuring a positive return on her investment from the outset.