» buying an investment property

Why you need a site inspection for a tax depreciation schedule

BMT team — Wed, 15 Jun 2022 23:35:41 +0000

Most of us wouldn’t purchase a car before seeing it or exchange unconditional contracts for a property without a building and pest inspection. We believe the same applies to site inspections when preparing a tax depreciation schedule. Property depreciation can save you thousands, sometimes tens of thousands, each financial year. A tax depreciation schedule holds the key to unlocking this cash flow. Your schedule lasts the lifetime of the property, so it’s important to get it right from the very beginning. In this article we will explore: What is a depreciation site inspection and what does it involve Importance of noticing improvements during a site inspection Maximising claims while maintaining compliance Support from the industry Site inspections make it easier for you Key points A site inspection ensures your depreciation claims are maximised and are compliant Hard-to-find assets are always found during a site inspection Both the AIQS and NTAA support the requirement of site inspections. What is a depreciation site inspection and what does it involve? A site inspection for depreciation purposes is different to other inspections like building or open houses. To complete a site inspection, a specialist needs to enter the property to find all the items that can be depreciated. During the inspection, you will see them documenting the property’s items, taking measurements and photographs and analysing the workmanship. An inspection is especially important if your property was purchased second hand. The site inspector will make note of all plant and equipment assets in the property. Although some of these assets may be impacted by 2017 legislation changes, they can still be included in your capital loss statement. In some scenarios this can be an important component if or when you decide to sell the property or dispose of the assets. More importantly though, a trained specialist will identify additional works that will qualify for depreciation via renovations or additions completed sometime many years ago. Importance of noticing improvements during a site inspection Renovations and additions completed to a property over many years ago can be hard to find and are often missed by the untrained eye. For example, if your investment property originally had a gravel driveway and if anyone concreted the section where cars are parked, it may not seem like a qualifying addition, but that driveway will increase your claim. In this scenario, you wouldn’t be able to claim depreciation on the gravel as it is soft landscaping. But you can still claim capital works deductions on the newly concreted section for up to forty years. A specialist site inspector will identify any renovations completed by the previous owner. This means that if the original structure of the building is too old and ineligible for capital works deductions, you can still reap returns from any recent renovations completed in the last thirty plus years. Data shows that of all the schedules completed by BMT, 66 per cent have been for properties that have undergone some kind of renovation or addition. Maximising claims while maintaining compliance Knowing what to include in a tax depreciation schedule can seem straight forward. You look at the property and include what’s there, easy right? However, a specialist knows what to look for during a site inspection to ensure that your claim is maximised correctly. For example, a ducted air conditioner has division 40 and division 43 components. The ducting needs to be valued separately and added to the capital works deduction while under TR2021/3 the packaged unit is considered plant and equipment and depreciated using its unique effective life. Another example might be properly using immediate deductions that allow the owner to instantly deduct qualifying assets in the year of purchase. While knowing the cost of the asset may appear to be the only thing required to claim the deduction, this isn’t the case. An asset must meet four important steps to be eligible. Support from the industry The Australian Institute of Quantity Surveyors (AIQS) is the peak professional standards body for build environment cost professionals. The National Tax and Accountants’ Association (NTAA) is the representative voice for the tax community. Both the AIQS and NTAA support the requirement of site inspections. They know that when site inspections aren’t completed, deductions are missed, and costly errors are made. Some of the most common errors that happen is incorrectly claiming capital works deductions and misusing depreciation incentives such as the immediate deduction. When errors such as these are made, you can come under Australian Taxation Office scrutiny. Site inspections make it easier for you As a property investor, you are already juggling many things from work to tracking your cash flow to mapping out your future investment strategy. When a site inspection isn’t conducted, it means you must do a lot of the heavy lifting, from organising stacks of paperwork to providing the property’s structural information that you have never needed to think about before and not being a specialist yourself things will get missed. A site inspection takes the guess work out of preparing your schedule. BMT Tax Depreciation can make it even easier by organising the inspection directly with your property manager. BMT has been conducting site inspections on properties for over twenty years. A BMT Tax Depreciation Schedule has never failed an audit and is the preferred supplier to thousands of accountants across the country. To learn more about depreciation and how a site inspection can ensure you claim the most from your investment, Request a Quote or call BMT on 1300 728 726.

The post Why you need a site inspection for a tax depreciation schedule appeared first on .

How to calculate rental yield

BMT team — Wed, 08 Jul 2020 03:19:34 +0000

If you’re looking to purchase a new property or evaluate the performance of a current property, there are some basic measurements that you need to know. Yield is a regularly used measurement to demonstrate the income returned on an investment. Unlike capital growth, yield measures the rate of income return based on the property’s annual cash flow and its value. A property’s rental yield is a good indication of it’s likely gearing. As a property investor, you should know how to calculate rental yield and what your yield should be. In this article we will cover: What is rental yield Types of rental yield Gross rental yield Net rental yield What is a good rental yield? How does depreciation affect rental yield? Key points: Rental yield measures the income return you make from your investment property each year There are two key types of yield for investments: gross yield and net yield An ideal rental property yield depends on the property’s characteristics and the local market What is rental yield Rental yield is the difference between your rental property’s income and expenses. This difference is then measured against the property’s value. Types of rental yield There are two key types of rental yield to consider and understand, gross yield and net yield. Gross rental yield Gross rental yield calculates the total rental yield before considering any expenses. It’s found using the annual rental income and the investment property’s value. In practice: how to calculate gross rental property yield Kim owns an investment property. She receives $40,000 per year in rental income and the property’s value is $800,000. The following calculation determines Kim’s gross rental yield of 5 per cent: 40,000 ÷ 800,000 x 100 = 5% Net rental yield Net yield considers the same elements as gross rental yield, but also factors in any property-related expenses. It’s important to consider net yield as it’s an accurate reflection of your property’s return. Some common expenses include property management fees, insurance, maintenance and repair fees, council rates and depreciation. You may be surprised to know that interest repayments aren’t generally included in the net yield calculation. This is because interest repayments aren’t classed as a direct property-related expense. Instead, they are related to your own financial circumstances. In practice: how to calculate net rental property yield To determine her net yield, Kim factors in her annual property-related expenses that come to $10,000. The following calculation determines Kim’s net rental yield of 3.75 per cent. ($40,000 – $10,000) ÷ $800,000 x 100 = 3.75% What is a good rental yield? There’s no magic number when it comes to determining what is a good rental yield. It largely depends on the specific characteristics of the property such as location, value and your personal investment property goals. Positive rental yields are favourable as they reflect a stable cash flow. It’s important to note that yield shouldn’t be considered solely on face value, you must uncover the elements behind the number and take a holistic approach. According to the May 2020 Corelogic Hedonic Home Value Index, gross rental yields among Australia’s capital cities range between 2.9 and 5.8 per cent. While gross rental yield across the country’s regional areas range higher, at between 4.5 and 6.7 per cent. Insights such as these can prove beneficial when determining what a good rental yield is. How does depreciation affect rental yield? Property-related expenses are included in the net rental yield, resulting in a reduced yield compared to gross rental yield. It’s key to remember that not all deductions you claim are a result from making a property-related expense. Depreciation is the second biggest investment property tax deduction after interest, and it doesn’t cost you any money. Depreciation is the natural wear and tear of a building’s structure and its assets over time. It’s a non-cash deduction, this means you don’t need to spend any money in order to claim it. BMT Tax Depreciation has been the most trusted specialist in the industry for over 20 years. We have completed more than 700,000 tax depreciation schedules for investors, Australia wide. To start claiming depreciation on your investment property, Request a Quote or contact BMT on 1300 728 726.

The post How to calculate rental yield appeared first on .

Your guide to choosing an investment property

BMT team — Tue, 10 Mar 2020 23:50:46 +0000

Finding the right property to compliment your investment strategy can feel like a chore if you don’t know where to start. While there is no one-size-fits-all approach, there are a few factors that should always be considered when choosing an investment property. To help you get started, we’ve created a go-to guide: 1. Location 2. Market demand 3. Rental return 4. Amenities 5. Future developments 6. Demographic 7. Low maintenance 8. Reputable build 9. Holding costs 10. Tax entitlements 1. Choose a location with your head, not your heart Location is key and it pays to choose with your head, not your heart. You want your investment property to be consistently occupied and to offer strong rental yield so do your research. Explore the area and take note of any major attractions like universities and shopping centres. Look into the immigration rate and recent population growth in the area. Consider the employment rate and any major industries within the location. All of these factors should play a part in your investment strategy. Remember that successful investment locations aren’t always in major metropolitan areas so be sure to look far and wide when searching for a property. You may have to look outside of your own neighbourhood or even interstate. If you are purchasing property in another state or territory, it’s also important to be aware of the relevant rules regarding stamp duty. 2. Is there strong market demand? A good investment location has strong demand. Look to vacancy rates for guidance as these figures offer insight into the success or decline of the rental market. Low vacancy rates usually indicate good investment prospects and stable tenancy. High vacancy rates can force landlords to reduce rent to attract tenants, which is detrimental to your investment strategy. A simple Google search can also help to determine whether there is an oversupply or undersupply of rental properties. An unusually high number of rental listings can indicate a seasonal change or a suburb in decline. 3. What’s the average rental return? Rental income will be your bread and butter so get familiar with the rental rates in your area. The average rental return is an important metric used to understand your likely cash flow. It can help you determine whether a property is likely to be positively or negatively geared, allowing you to make informed decisions based on your financial situation. You can easily estimate your rental return by using PropCalc, the essential cash flow calculator. PropCalc is a convenient online calculator revolutionising property research by using key market analysis and customisable data to show exactly how a purchase will affect your financial position. The tool will estimate your rental return and determine whether the investment will be negatively or positively geared based on your personal scenario. 4. Are there plenty of amenities nearby? Schools, hospitals, shopping centres, transport, restaurants and cafes. Having local amenities near an investment property will make it more attractive to tenants and can even help to improve the property’s value over time. It may cost you more, but it will be worth it in the long run. 5. Be informed about council plans and development projects Council plans and developments offer insight into the supply and demand of an area and can help you determine any factors that could impact your investment strategy in the coming months or years. For example, if there is a large housing estate in the works, this may negatively impact your investment as market demand changes. On the other hand, development to improve existing infrastructure such as transport options can have a positive influence. Savvy investors can refer to the relevant local council to research any upcoming projects, building regulations and developments in the pipeline. Alternatively, you can find details on MyBMT, an online portal designed to help you and your investment team access and manage your depreciation needs. Using the Research and Insights tool within MyBMT, you can discover properties recently listed for sale or rent, view Census data and keep abreast of planning applications near a property. The interactive platform also gives you on-the-go access to depreciation information, insurance quotes, valuable market analysis and helpful property tools. To find out more, visit mybmt.bmtqs.com.au. 6. Know your target demographic It’s crucial to understand your target market. Ask yourself, will the tenants be university students, young families, professionals or the elderly? Do they own one or more cars that may require a garage? What is their likely employment? How much are they likely to earn? These factors can help you determine the appropriate property for your investment strategy. 7. Find a property that is low maintenance Look for an investment property that is low maintenance and ready to lease immediately. This will reduce the period of unoccupancy and lower your holding costs sooner. For example, a property with a pool, large backyard and elaborate gardens may look appealing but will require regular upkeep. In comparison, a neat and tidy unit with a paved outdoor area needs very little maintenance. 8. Ensure the property is a reputable build You can nail the location, market demand and demographic, but if your property is riddled with structural issues it could end up costing you more than you bargained for. To avoid any unwanted problems, ensure your property has a reputable build and always get a building report completed before purchase. A building inspector should examine the entire property, both interior and exterior, to identify any existing issues and compile a report detailing the condition of the property, from cosmetic issues to major structural damage. This may include structural movement, roof damage, water penetration, rising damp and mould issues. Understanding the defects of a property and the cost to maintain or fix them will help you make a more informed decision when purchasing an investment. 9. Properly assess the holding costs Once you’ve conducted thorough market research and found a potential investment property, it’s time to assess the associated holding costs. Savvy buyers can calculate this cost with […]

The post Your guide to choosing an investment property appeared first on .

Property market update September 2019

BMT team — Wed, 11 Sep 2019 01:49:09 +0000

National dwelling values increased for the first time since October 2017, as the Australian property market continued its trajectory to recovery throughout August. With the spring season forecast to lift the market, experts are predicting a slow and steady recovery. Property values Housing values increased across five out of the eight capitals and national dwelling values rose by 0.8 per cent throughout August. The increase in dwelling values lifted the national annual rate of decline to -5.2 per cent, an improvement from May 2019 when values reached their sharpest annual decline of -7.3 per cent. August was also the third consecutive month of capital gain in Sydney, Melbourne and Hobart and the second consecutive month in Brisbane. The weakest market conditions remain in Perth and Darwin where values have been declining for several months. Darwin values are now 30.7 per cent below their 2014 peak, while Perth values are down by 20.6 per cent. Despite this, there are subtle signs of improvements in the rate of decline for both cities. Residential property listings An increase in buyers combined with a lack of stock has contributed to further market recovery in August, with listing numbers expected to increase throughout spring. The beginning of September has already signalled a resurgence in the property market, with the largest seasonal rise in new listings in five years. According to CoreLogic data, the first weekend of spring recorded a 21.7 per cent increase in the number of homes listed on the market in Sydney, Melbourne, Brisbane, Adelaide and Perth. Out of the eight capitals, Melbourne had the most substantial increase in listing numbers, up 36.2 per cent from its winter low. Vacancy and rental rates Dwelling values and listing numbers are improving but the same cannot be said for the national rental market. Rents fell 0.1 per cent over August, the third successive month of decline. Brisbane, Adelaide and Hobart rental markets were the only exceptions. Sydney and Melbourne are leading the softening of rental yields, however if the market recovery continues, we could see this stabilise in the coming months. Auction clearance rates Auction clearance rates across the country continued to climb in August and are now at their highest levels since early 2017. Sydney’s auction clearance rate was almost 50 per cent higher in the last week of August compared with the same time last year, as experts predict a bumper spring with the number of property listings already rising. During the same week, Melbourne auctions returned a preliminary clearance rate of 76.1 per cent. Across combined capital cities, 1,605 homes were taken to auction in the final week of August, returning an average preliminary clearance rate of 73.6 per cent. Finance and interest rates Lending to property investors tumbled in July, however, could be back on the agenda as we head into spring. As rates drop and property prices stabilise, the rental investment market is showing signs of improvement. CoreLogic data shows the national average rental yield on residential property is currently 4.1 per cent, a return which experts suggest can comfortably surpass term deposit rates. In construction news, reduced interest rate cuts and tighter credit conditions have contributed to a fall in building approvals. Overall, the number of building approvals fell 9.7 per cent in July. Houses declined by 3.3 per cent and other dwellings, which comprises apartments and townhouses fell by a startling 18.4 per cent. Commercial property The retail property market is continuing to transform as major stores like David Jones, Myer and Big W announced the decision to reduce their store footprint. The reduction in retail stores could see further opportunities for commercial property investors in the warehousing sector, as businesses start to increase their online services. In the agriculture sector, the demand for rural properties didn’t waver throughout August, despite ongoing drought conditions. Reasonable commodity prices, particularly in the sheep market, seemed to lift the rural property market sentiment. Some purchasers were still showing hesitation, with limited cash flow from their existing holdings and little to no stock feed for additional properties.

The post Property market update September 2019 appeared first on .

New Queensland smoke alarm legislation, review now to ensure you remain compliant

BMT team — Fri, 23 Aug 2019 01:28:24 +0000

Queensland households are set to become the safest in Australia thanks to new fire safety regulations rolled out by the government. Let’s take a look at what these changes mean for those with investment properties in this state and also for those considering buying a Queensland property. Contents: What are the changes? When do the rules take effect? What are my obligations as a landlord? What are the obligations of a tenant? Why comply? Smoke alarm rules vary across Australian states and territories What are the changes? New smoke alarm legislation requires all Queensland residences to be fitted with interconnected photoelectric smoke alarms in all bedrooms and hallways connecting bedrooms with the rest of the property and on every level of the dwelling. The new regulations will affect over 450,000 rental properties throughout Queensland and may result in investors paying up to $2,000 for new smoke alarms. The requirements may seem like a negative due to the financial outlay but understanding how you can make this work in your favour by claiming depreciation deductions to reduce your taxable income will help you to capitalise on your investment while also protecting the safety of your tenants. A BMT Tax Depreciation Schedule outlines all the deductions you can claim for your property, including plant and equipment assets such as smoke alarms. The fee for a schedule is 100 per cent tax deductible and the schedule lasts for forty years. Where landlords fail to comply with regulations, they will be unable to rent their property. Fines may apply as well as possible criminal charges. Tenants residing in a non-compliant property are also unable to renew their lease. The Queensland Government Fire and Emergency Services website outlines the benefits of the new smoke alarms: ‘Photoelectric smoke alarms, also known as optical or photo-optical, detect visible particles of combustion. They respond to a wide range of fires but are particularly responsive to smouldering fires and the dense smoke given off by foam-filled furnishings or overheated PVC wiring.’ Interconnected smoke alarms connect to other smoke alarms in the property either through hard-wiring to a home’s mains power supply or wirelessly when battery operated. The result is if one smoke alarm detects smoke, they are all activated. Regulations require that wireless smoke alarms must be non-removable with batteries manufactured to operate the smoke alarm for ten years minimum without a need to recharge. Research shows that photoelectric smoke alarms are superior in quality to standard smoke detectors and have an increased effectiveness across a wider range of home fires. This would lead to an expected increase in the safety of occupants as well as minimising property damage as a result of early detection. When do the rules take effect? In a ten year phased approach, commencing from 1st January 2017, the Queensland government is rolling out changes requiring the installation of interconnected photoelectric smoke alarms over three specific periods. All rental properties are required to meet these requirements by 31st December 2021. Interconnected photoelectric smoke alarms must meet the Australian Standard AS3786–2014 and be installed according to the following dates: What are my obligations as a landlord? Landlords must ensure interconnected smoke alarms are installed and compliant with the new Queensland government requirements by 31st December 2021. Smoke alarms should display the code ‘AS3786–2014’ on the body of the smoke alarm and they can be sourced from hardware stores, electrical retailers or obtained through qualified electricians. Landlords must ensure smoke alarms are placed on the ceiling (where possible) and installed throughout the property as advised above. They must also ensure each smoke alarm has been tested and cleaned within thirty days prior to the commencement of any new lease. This includes renewal or existing tenancy agreement extensions. What are the obligations of a tenant? Tenants must test and clean each smoke alarm at least once a year. This may involve referring to smoke alarm manufacturer instructions where a ‘test’ button on the device may not be visible. Regarding the cleaning of a smoke alarm, this will usually involve vacuuming the device. Why comply? Ensuring your property and the people with it are protected is paramount. Complying with the rules and regulations surrounding the type and installation of smoke alarms will also ensure you can continue to lease and/or sell your investment property and avoid non-compliance penalties. Acting now will ensure you can secure the services of an electrician to install any smoke alarms required. With the looming deadline and approximately 450,000 Queensland rental properties requiring smoke detector installation, it is likely that demand and costs will increase. BMT staff can assist you in reviewing your current circumstances and provide a tax depreciation schedule that includes forecast of eligible claims for depreciable assets and structures. To learn more speak with one of our expert team on 1300 728 726 or Request a Quote online. Smoke alarm rules vary across Australian states and territories Landlords interested in obtaining more information on smoke alarm legislation across Australia can visit Australian smoke alarms regulations and rules for landlords.

The post New Queensland smoke alarm legislation, review now to ensure you remain compliant appeared first on .

Are tiny houses a good investment?

BMT team — Fri, 07 Jun 2019 04:00:01 +0000

The tiny house trend has made headlines for its minimalist lifestyle and quirky appeal. More of a social movement than a fad, these small dwellings have also become a hot topic in the Australian property market. Tiny houses are compact living spaces often built on wheels. They help people live debt free and are often more environmentally friendly than traditional housing. But are tiny houses a good investment? Here’s what you need to consider before buying a tiny house investment property. Contents: Buying a tiny house Investment opportunities Tiny house depreciation deductions Buying a tiny house Before you look to buy an investment property, you’ll need to assess your finances and calculate all the associated holding costs. One of the key benefits of a tiny house investment is that the purchase cost is significantly less than a traditional home. Depending on the size and design, tiny houses range from $50,000 to $90,000. Tiny houses offer a way for people to enter the property market without gaining a substantial mortgage. However, if financing is required it’s important to note that a tiny home with wheels will be legally classed as a caravan and issued with a Vehicle Identification Number. Typical financing options for this type of tiny house include: caravan loan line of credit personal loan extension of an existing mortgage (you must have enough equity in an existing property to qualify). Another important consideration is the legalities around living in tiny houses on private land. These regulations generally exist at a local council level so it’s necessary to research the laws specific to your area. Investment opportunities Short-term holiday letting is a good way to earn an income from a tiny house investment. Holiday renting has become increasingly popular in recent years due to the rise of platforms like Airbnb. As a result, the rules surrounding short-term letting have also evolved. For example, New South Wales legislation has specific planning laws for holiday letting. The law states that if the host is present, they can use their home for short-term holiday letting all year round without submitting a development application to local council. If the host isn’t present, that property can only be leased for up to 180 days per year in Sydney and 365 days in all other areas of the state. For this reason, it’s essential you understand the requirements of holiday letting in your state or territory. Along with legislation, there are several expenses to consider when leasing a tiny house as short-term holiday accommodation. Many rental services and booking platforms charge a certain percentage per booking and this will need to be factored into your rental rate. You’ll also need to think about cleaning costs as guests will expect their accommodation to be cleaned to a high standard. Be sure to consider all relevant costs when deciding a price to charge for your tiny house. For more advice on holiday rentals, read ‘Tips for buying a holiday rental property.’ Tiny house depreciation deductions An income-producing tiny house may be eligible for thousands of dollars in depreciation deductions. Owners can generally claim tax depreciation for the time a tiny house was rented or genuinely available for rent. That is, the property is given broad exposure to potential tenants and considering all the circumstances tenants are reasonably likely to rent the property. It’s important to note that a tiny house is legally classified as a caravan, meaning tax depreciation schedules will adhere to rules and regulations relating to caravans, not houses. A caravan, and therefore a tiny house, has an effective life of twenty years and can be depreciated at 5 per cent using the prime cost method or 10 per cent using the diminishing value method. Assets within the tiny house such as flooring, blinds and even solar panels can be depreciated based on their effective life which is set by the tax commissioner and updated regularly through tax rulings. To find out how much you could claim on a tiny house investment, Request a Quote or speak with one of the expert team at BMT Tax Depreciation on 1300 728 726.

The post Are tiny houses a good investment? appeared first on .

Rentvesting – a step on the first rung of the property ladder

BMT team — Thu, 25 Apr 2019 23:46:02 +0000

Rentvesting is a clever way to get your feet on the first rung of the property ladder. It has become more popular in recent years thanks to rising property prices and issues with housing affordability. This was shown in the latest statistics from the Australian Bureau of Statistics (ABS) on Housing Occupancy and Costs for the 2015/2016 financial year published in October 2017. According to the ABS, more than 1.78 million Australian households owned a residential property other than the one they currently reside in. Of these households, 342,000 owned a residential property but were renting their usual residence. Given rentvesting’s rising popularity and ability to help both home buyers and investors to enter the property market, let’s look at what this method involves as well as some of the pros and cons to be aware of. What is rentvesting? Breaking into the property market can be difficult and rentvesting allows you to buy an investment property in an area you can afford while renting a property in a location that suits your lifestyle. Rentvesting can help you get into the property market sooner, particularly if buying a first home in the area you live is currently out of reach. By buying an investment property, rather than a home, you can build a property portfolio which can later be used as leverage to help afford a home, or even additional investment properties down the track. Let’s say you want to buy a four-bedroom home in a popular Melbourne suburb, but the sale prices in the area mean these homes are out of your reach. The rentvesting solution to this problem would be to rent the ideal four-bedroom home in your desired suburb where you want to live and then buy an investment property in a suburb where house values are more affordable. Renting the investment property to tenants will help you to pay off the loan rather than having to use part of your income or savings to meet regular loan repayments. Over time, the property may increase in value, building the equity you need to meet any loan requirements necessary to purchase a home or expand your portfolio down the track. Pros of rentvesting There are a number of pros for those who decide to employ rentvesting as part of their investment strategy. Apart from the obvious financial freedom this method provides, one key benefit is the ability to live in an area that suits your current circumstances. Location is key and often rentvestors will rent in a location that is close to where they work or study, or in an area that is within reach of features that are important to their desired lifestyle such as beaches, parks and restaurants. Given rentvestors are generally of the younger generation, they often aren’t ready to purchase a home in an area where they may not plan to stay for the long term. The flexibility to complete study, travel or move from place-to-place while still purchasing a property as an investment is a drawcard for those thinking about whether to rentvest. Similarly, rentvesting provides an opportunity to live in the property that you want to live in, now. If a property in a desired location is unaffordable, why not rent and achieve the living conditions you want now rather than compromise? Owning an investment property also provides you with a range of tax benefits. In addition to earning a rental income you can claim expenses involved in holding the property such as interest on your loan, property management fees, repairs, insurance, maintenance and property depreciation. These tax deductions are only available if a property is income producing and cannot be claimed on a home. This additional cash flow also helps to make owning a property more affordable. Cons of rentvesting While rentvesting might sound appealing, not all aspects of this strategy are positive. Firstly, when you rent a property there is no guarantee that you can stay there for the long term. A landlord may decide to sell the property or move into it themselves, forcing you to find another home. While notice is required, there may not be enough time to find another property that meets all your desired needs and matches up to your expectations. You also can’t personalise the property. In a rental property you are limited to the amendments and updates the landlord is willing to take out. You can’t renovate to add new features and often even require permission if you wish to hang pictures in any permanent fashion. You have to be willing to compromise and live with what you have. Finally, owning an investment property is not without its risks and you should seek both financial and tax advice. Property markets fluctuate, and you may not achieve the capital gain to produce the equity needed to buy another property in the short term. It’s important to stay in tune with what is happening with prices in the area. Choosing the best rental property to live in while you rentvest Every individual will have a different idea of what they need in order to feel comfortable in their home. Start by making a list of things you desire as well as the things you can’t live without. Do you need a certain number of bedrooms? Is it essential for there to be two bathrooms or a two car garage? Picking a suburb location which has these main features is the next step. Decide where you need to live in relation to work and set a budget of how much you want to spend in rent to help narrow your search. Wherever you choose, check access to transportation hubs and nearby facilities and even do a search to gauge whether vacancy rates for the area are high. This can be handy to know in case you have to move if your landlord decides to make any changes after your tenancy agreement ends. Finding the right investment property in which to rentvest The key is to do […]

The post Rentvesting – a step on the first rung of the property ladder appeared first on .

Navigating the property settlement process

BMT team — Wed, 23 Jan 2019 00:01:03 +0000

If buying an investment property was a race, then settlement would be considered the finish line and your prize would be finally taking legal possession of your property. The property settlement process can be daunting, but with a little understanding of the process and the right preparation, the keys to your property will be yours before you know it. What is property settlement? Property settlement is the legal process that is facilitated between your financial and legal representatives and those of the property’s vendor. The vendor sets the settlement date in the contract of sale. As a general rule, property settlement periods are usually thirty to sixty days. Who takes care of what on settlement day? Settlement day occurs when your solicitor or conveyancer meets with your lender and the vendor’s agents at an agreed time and place to exchange documents and arrange for the balance of the purchase price to be paid. Your lender will: Register a mortgage against the title of your new property Release the funds to purchase the new property Your solicitor or conveyancer checks that: Any existing mortgage on the title to the vendor is finalised Any third party or person who has rights over the property (a caveat) is removed All clauses on the sales contract are fulfilled The transfer of land and mortgage is registered with the title office in your state or territory Make sure you’ve got enough money set aside to cover Stamp duty Lenders mortgage insurance Building and contents insurance Other fees and charges Complete a final inspection of the property Just before settlement, you’ll have the opportunity to do a final inspection of the property. Often this is done the day before or the morning of the settlement. The vendor must hand over the property in the same condition as when it was sold. When you view the property for the final time you should check: The appliances, hot water system, heating and cooling are all in working order Structure, walls, light fittings, window and floor coverings are in the same condition as when you first saw the property Locks, keys and automatic garage door controls are supplied and working You can organise a defects inspection by a Building Inspector if you don’t feel confident in checking these things yourself. What happens after settlement? After settlement, your lender will draw down on your loan. This means that they’ll debit the amount they’ve paid at settlement from your loan account. You’re then responsible for paying land transfer duty or stamp duty. It’s usually paid on the settlement date. The title to the property won’t be transferred to your name until you have paid this duty. Once settlement is completed, you can collect the keys from the agent and take possession of your new property. If you have purchased an investment property, organise a depreciation schedule A depreciation schedule prepared by BMT Tax Depreciation helps to maximise the cash return from your investment property each financial year. To ensure that you claim the maximum depreciation deductions, a BMT Tax Depreciation Schedule will last for the life of the property or for forty years, as specified by the Australian Taxation Office. BMT also provide a free, easy to use tax depreciation calculator, which can assist you with an estimate of available deductions for any property. Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.

The post Navigating the property settlement process appeared first on .

What’s the best way to buy a house at auction?

BMT team — Wed, 14 Nov 2018 04:57:19 +0000

While auctions are somewhat unpredictable, it’s nevertheless important to be prepared to avoid overbidding in the heat of the moment. Auctions are typically high-pressure environments where clever auctioneers use techniques to encourage big spending. To help you land your desired property at a price you’re comfortable with, here is our advice on the best way to bid at auction. Do your research If you’ve never experienced an auction before, it’s a good idea to try to attend a few to get the feel for them before you plan to bid. There are certain protocols specific to auctions and you will feel much more comfortable if you already know what to expect. During the research stage, carefully review the contract and ensure your finance is in order so you can write a deposit cheque on the day. Ensure you have researched the price of similar properties in the area and set yourself a maximum price that you would be comfortable with paying, taking depreciation deductions into consideration. Depreciation makes owning an investment property much more affordable. Use the BMT Tax Depreciation Calculator to see the likely deductions claimable on the property before deciding on your walk-away price. It’s a good idea to take advantage of PropCalc, an innovative tool which calculates the real costs of owning an investment property based on its specifications. You can also find investor case studies on our website for various property types and price points to show you how depreciation improves investors’ cash flow in different scenarios. Slow the pace on auction day Auctioneers want their auctions to remain at a fast pace to increase the sense of urgency, putting pressure on bidders to place bids. In these situations, it can be easy to bid higher than you had planned to in order to avoid missing out on the property. Slowing the pace of the auction will disrupt the auction’s momentum and give you a fraction more time to consider your bids. A technique used the slow the pace of an auction is to bid in odd increments. Auctioneers try to increase bids in even increments as they are simple to calculate and allow auctioneers to retain the auction’s speed. Bidding in odd increments will cause the auctioneer to slow the pace and subsequently, take the pressure off bidders to place urgent bids. Keep watch As important as it is to show your competition you mean business by standing tall and confidently placing bids, it is equally important to watch your rival bidders’ body language. If rivals are chatting amongst themselves or hesitating, it’s a good sign your competition are reaching their upper limit. Try to counterbid quickly and confidently to show your competition that you are prepared to top whatever they throw at the auctioneer. Read some of our recent blog posts: Shining the investor spotlight on Flemington, VIC Property market update – October 2018 Depreciation incentives lure savvy property investors to The Block 2018 auctions Image Source: Collins Home Loans

The post What’s the best way to buy a house at auction? appeared first on .

Depreciation incentives lure savvy property investors to The Block 2018 auctions

BMT team — Mon, 29 Oct 2018 22:45:58 +0000

The five apartments featured on The Block 2018 (season fourteen) have exceeded sales expectations and set a new record price for the suburb of St Kilda. The sale of the luxury apartments is expected to breathe new life into the St Kilda property market. Each of the luxury apartments sold for well over their estimated reserve price, assisted greatly by the scarcity factor of the building’s heritage, it’s art deco charm and the generous proportions of each apartment. Locals described the Channel 9 The Block 2018 renovation of the former Gatwick Hotel to be the catalyst for real improvement in Fitzroy Street and its surrounding areas. The show’s attention brought excitement to a totally new and untested part of the Melbourne market, with property experts calling it “the Gatwick effect” — a renaissance of the once-thriving dining strip and its surrounds. During the show’s finale auction episode, which aired on Sunday the 28th of October 2018, the five apartments at 34 Fitzroy Road fetched between $2.77 million and $3.02 million. This was well above the median house price in St Kilda, which sits at only $1.05 million. This year’s The Block 2018 winners were controversial Sydney couple Hayden and Sara, whose win left everyone a tad gobsmacked. Not only did they smash their reserve price, but they came out ahead of the Gatwick’s two most popular apartments. Their lower floor apartment sold for $3.02 million and the couple banked the overall prize money of $100,000, adding to their $545,000 prize money for the amount the property achieved above the reserve. In second place, after heading into auction night with a clear, competitive advantage, were South Australian couple Kerrie and Spence. Their prize money totalled $415,000. The couple were previously predicted to be the season’s winners, thanks to the lucrative depreciation estimates found in their apartment by BMT Tax Depreciation as shown the previous episode below. According to estimates provided to each of the couples by BMT, Kerrie and Spence’s property had the highest amount of depreciation deductions available, with an estimation of $135,132 in tax depreciation deductions in the first full financial year alone. In total, Kerrie and Spence’s apartment was found to hold over $3 million in depreciation deductions. These depreciation deductions were a lure for potential investors according to Kerrie and Spence’s Real Estate Agent, Hockingstuart’s Emily Adams. “We had a lot of property investors look at the apartments this year prior to auction. They loved the potential tax depreciation that these apartments came with,” said Ms Adams. The attractive depreciation schedules are the result of substantial improvements made to the building. Along with expensive appliances and luxury fittings, the apartments also come with a full suite of designer furnishings and homewares. In Kerrie and Spence’s apartment, the property had a number of standout items such as a sophisticated entertainer’s kitchen with designer Caesarstone kitchen benches, Bosch appliances, an outdoor spa, triple garage and a glorious master retreat which helped to make this property a tremendous buy for property investors. These types of assets, combined with the substantial structural improvements made, combine to result in the significant depreciation deductions that investors could claim as a tax deduction and therefore assist them in reducing the cost of holding the property once it becomes income producing. Interestingly, it was reported that one buyer who splurged almost $6 million for two of The Block penthouses had inspected the former Gatwick Hotel only two nights before the auction. The tech entrepreneur and property investor said he had snapped up two bargains. He bought Norm and Jess’s apartment for $2,859,000 before strolling next door and buying Bianca and Carla’s apartment for $2,991,000. Property investors that are interested in better understanding the tax deductions that may be available to them for any property can utilise BMT’s free online tax depreciation calculator or call 1300 728 726 to speak to an expert at BMT Tax Depreciation on or visit the BMT website for more information. All images from 9Now The Block.

The post Depreciation incentives lure savvy property investors to The Block 2018 auctions appeared first on .