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Construction costs explained

BMT team — Tue, 18 Aug 2020 23:48:24 +0000

When building an investment property, you must budget for both the construction cost and any other surprises. While every property is different, gaining a ballpark figure of the cost of constructing an investment property can help you build the best-suited property possible. In this article we will explore: What are construction costs? Construction cost calculations explained Regional variations and construction costs How do construction costs help investors? BMT Tax Depreciation is the specialist What are construction costs? Construction costs can be estimated for any number of property types, including residential houses, units and apartments, townhouses and duplexes and commercial buildings. Construction costs provide a guide of costs for construction and can be as detailed as required. Construction estimates usually range in detail from a preliminary estimate which is based on rates for the various building elements to a very detailed cost plan that identifies all individual materials and installation costs. Some of the key factors that impact construction costs for residential buildings include the type, level of finish, availability of materials, site conditions, current demand levels and the region it’s built. A specialist quantity surveyor is one of the few professionals that can calculate construction costs for property depreciation purposes. Construction cost calculations explained The BMT Construction Cost Table is a useful guide and calculates costs based on the Gross Floor Area (GFA) rate. The GFA rate is based off two important elements. The first being the Fully Enclosed Covered Area (FECA) that includes items like staircases, basements, columns and piers. The second element of this rate is the Unenclosed Covered Area (UCA) that includes items such as roofed balconies, attached covered walkways and porches. Generally, the GFA rate is the sum of both the FECA and UCA floor area of a building as a square metre rate. Regional variations and construction costs A building’s construction cost will change depending on its location. For example, you wouldn’t expect to pay the same amount for a build in a major city such as Sydney as you would in somewhere more regional like Cairns. This is because region pricings vary based on supply, demand, land type, resources and trade availability. The BMT Construction Cost Table is based on the Sydney region, however percentages are available to allow for regional variations. How do construction costs help investors? There are three key ways that understanding construction costs can help investors. 1. Depreciation As discussed, a specialist quantity surveyor is one of the few professionals recognised as having the skills and qualifications to estimate construction costs for depreciation purposes. The structural part of a build, like walls and mortar, are depreciated using capital works deductions. On average, capital works make up 85 to 90 per cent of total depreciation claims. 2. Insurance Holding suitable insurance on your investment property is crucial. Fundamentally, your property’s insurance should cover its construction cost, or replacement cost, if it was destroyed. If your insurance doesn’t cover this cost, you are underinsured. Unfortunately many find out that they are underinsured too late and the consequences can be costly. Contacting an insurance specialist with access to comprehensive construction cost data is the most effective way to protect your investment against underinsurance. 3. Budgeting It almost goes without saying, but building a property is a large expense. Accessing a guide of construction costs, down to the square metre, can help you in the very early stages of planning your budget. BMT Tax Depreciation is the specialist BMT’s extensive experience and construction cost knowledge ensures that all depreciation deductions are maximised correctly. To learn more about depreciation and how BMT can help you maximise the cash flow form your investment property, call 1300 728 726 or Request a Quote.

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Bushfires offer a timely reminder for landlords

BMT team — Tue, 10 Dec 2019 03:58:43 +0000

Australia has suffered through an extraordinary bushfire season with almost 5 million hectares of land burned in New South Wales alone. Many areas across the country continue to battle the elements as fire scorches natural habitats and threatens to destroy hundreds of homes in its path. In places where fire hasn’t reached, smoke haze lingers as a stark reminder. 69 fires contiune to burn in NSW with 20 to be contained. Firefighters have worked tirelessly to slow the spread of fire and build containment lines ahead of increased fire dangers. Hot and windy conditions are expected to return to many parts of NSW this week. #nswrfs #nswfires pic.twitter.com/cSZL0dL73K — NSW RFS (@NSWRFS) January 19, 2020 The 2019-20 bushfire season offers a timely reminder of the importance of having proper home insurance. Authorities in New South Wales estimate that more than 1,500 homes have been destroyed by fire, so it’s vital that you have the proper insurance to protect your investment property. Are you properly insured? In 2018, the Banking Royal Commission’s probe into the insurance sector brought to light widespread misconduct and breaches of the Insurance Code of Practice. One issue that was raised was underinsurance, where policyholders were led to believe that their policies covered the full replacement of their properties but discovered their cover fell short when they made a claim. For property investors, this means facing considerable losses and risking financial hardship in the case of a natural disaster like a bushfire. More recently, an Insurance Council of Australia report found that a staggering 70 percent of Australians use their own judgement as the basis for an insurance valuation. This is an alarming statistic, given landlords could lose thousands if they have insufficient cover. Types of insurance to consider As a landlord, it’s essential to have an understanding of investment property insurance including building and contents. Building insurance covers the cost of repairing damage to the structure of your property, particularly in the event of a fire, storm or flood. While contents insurance covers for damage to, or loss of, personal possessions in the home. Of those with contents insurance who purchased a new high value asset in the past five years, more than half did not update their contents policy after making the purchase. In fact, a startling 23 per cent of homeowners said the highest value item in their home wasn’t covered. This leaves investors exposed in the event of natural disaster, especially given there may be thousands of dollars of claimable depreciable value left in destroyed assets. It’s important to contact a specialist Quantity Surveyor if assets are damaged as a site inspection may be required. Loss of rent cover is another option designed to cover your financial loss after damage to your property prevents it being tenanted. This damage may be caused by floods, fires, and any others indicated in the policy’s product disclosure statement. This cover may also apply where property access is prevented by damage to surrounding properties. With 77 per cent of homeowners exposed to significant financial loss, it’s more important than ever to review, renew or arrange proper home insurance for your investment property. As an insurance broker, BMT Insurance has access to construction cost data to provide a guide on estimated replacement costs on your property. This guide can help you to find the most cost effective insurance to meet your needs. For more information, contact the expert team at BMT Insurance or call 1300 268 467 today. Related articles: What is landlord insurance and what does it cover? Home and contents insurance you need for your investment property

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Home and contents insurance you need for your investment property

BMT team — Fri, 18 Oct 2019 00:17:14 +0000

Do you have the right level of insurance cover for your investment property? Both under and over insurance can impact your finances, leaving you unnecessarily out of pocket. Under-insuring puts your investment property at risk; if is destroyed or damaged you won’t have enough money to cover the cost of rebuilding or repairing. Over-insuring means you are paying more in premiums than you need to, reducing funds that could be better spent or invested elsewhere. The Insurance Council of Australia (ICA) commissioned Quantum Market Research to undertake a national survey of over 1,000 Australians in 2014 and found 83 per cent don’t have enough insurance cover to allow them to continue with the same standard of living. Protect your investment property and the assets within it by understanding the different types of insurance and what they cover. In this article we will look at: Building insurance Contents insurance Landlord insurance Building insurance Building insurance is designed to cover repair and replacement costs to the structure of your investment property from unexpected events such as accidental damage, fire, storms, earthquakes and floods. It usually provides protection for areas including fences, gates, garages, sheds, pipes, cables, drains and solar panels. The potential financial risks for owners of investment properties without building insurance is high. With one in 25 homeowners surveyed not having building insurance, ensure you’re protected with the right level of cover. With access to construction cost data and a range of insurers and policies, BMT Insurance can estimate the replacement cost of your property to help find you the most cost-effective insurance cover to meet your needs. The BMT Replacement Cost Estimator uses our construction cost data to provide a guide on estimated replacement costs. Contents insurance Contents insurance provides coverage for damage to, or loss of, personal possessions located within your home. A key finding of the ICA survey showed that 77 per cent of homeowners don’t seek professional valuation of their possessions. Instead they assess the value themselves. This means they may not have enough cover for their possessions. Alternatively, they may be paying premiums in excess of what they need. The survey also found one in four Australians don’t know what’s covered in their home and contents insurance policy. Landlord insurance Landlord insurance is designed to protect landlords against the risks associated with renting a property out. It can cover: loss of rental income loss or damage to building and contents malicious damage accidental damage theft or burglary by tenants legal expenses incurred when evicting a tenant. As it’s an investment expense, landlord insurance can also be claimed in your tax return. Read more about landlord insurance and what it covers. BMT can tailor an insurance package to suit your needs. If you don’t already have insurance or you’re unsure if your insurance is adequate for your investment property, contact BMT Insurance online or call our expert team on 1300 728 726 today. The information provided is general in nature and does not constitute personal advice. This means that whilst we may generally recommend the products we arrange on your behalf, we do not consider whether the product is appropriate for your own personal objectives, financial situation and needs in making the recommendation. You will need to consider the appropriateness of any information or general advice given, having regard to your personal situation, before acting on the above.

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