» Investment Property

Who is responsible for repairs and maintenance of the premises?

BMT team — Tue, 26 Sep 2023 05:15:44 +0000

A rental property must always be in a suitable state for tenants to live in. While a rental property doesn’t need to be in perfect condition, a landlord must keep it in a reasonable state of repair considering its age and the rent charged. Tenants, too, have a responsibility to keep the property in a state of cleanliness considering the state of the property when the tenancy began. Occasionally disputes arise, leaving people to wonder, who is responsible for repairs and maintenance of the premises – the landlord or the tenant? Here is a rundown of some of the things that are commonly contested. Pest control Fire safety Gardens Plumbing Pest control Is pest control the responsibility of a landlord or tenant? It is a landlord’s responsibility to ensure their rental property meets the standards of health and safety laws. Meanwhile, the Residential Tenancies Act 1997 states that tenants must take reasonable care of and keep the premises reasonably clean. Generally, a landlord is accountable for pest and vermin issues at the beginning of a tenancy, and a tenant is responsible after they move in. But of course, there are exceptions. Say a cockroach infestation is caused by a hole in the wall and not the tenant’s lack of cleanliness. In this case, the tenant may not be held responsible for eradication. However, if the infestation is due to the tenant failing to remove rubbish, then the eradication would likely fall on the tenant. In the event of a dispute, other factors that could determine who is responsible for pest control on the premises include the history of the property, what is recorded in the condition report, and if there were factors beyond the tenant’s control. Fire safety Smoke alarm rules vary across Australia, but generally they must meet Australian Standards. Landlords are obliged to fit their rental property with compliant smoke alarms as defined by the relevant state or territory legislation. Failure to do so can result in penalties. To find out more about smoke alarm legislation, read Australian smoke alarms regulations and rules for landlords. Gardens Living in a rental property with a beautiful garden can be great, but gardens require maintenance to keep them looking good. Yard work such as mowing, edging and weeding is usually the responsibility of the tenant, unless the tenancy agreement states otherwise. Major works such as tree lopping or hedges that require specialist upkeep are normally the responsibility of the landlord. Outdoor area maintenance arrangements should be listed in the tenancy agreement and noted in the entry and exit condition reports. Plumbing The upkeep of plumbing is a frequent point of contention. Essentially, both landlords and tenants play a part in the maintenance of plumbing in a rental property. It is the landlord’s job to ensure the property’s plumbing is in a safe state and suitable for tenants. And once a tenant has signed the tenancy agreement, it is up to them to take good care of the property and maintain the functional aspects including plumbing. This means that the tenant should be diligent in preventing issues like blockages by keeping the property clean and not flushing things down drains. Again, all the requirements around who will take responsibility for the issues that may arise during the tenancy term – and each person’s rights – should be laid out in the Residential Tenancy Agreement. In the case of an emergency such as a burst water pipe or broken toilet, the landlord should be called to contact a plumber. If the plumber finds the issue was caused by tenant negligence, it would be the tenant’s responsibility to pay for the work. If the landlord or real estate agent cannot be contacted or can’t attend to any urgent repairs in a suitable timeframe, the tenant can arrange the repairs. It is advisable the tenant doesn’t pay more than $1,000 as the landlord is only required to pay for any reasonable costs up to this amount. The tenant must give the landlord or agent written notice about the repairs, costs and copies of receipts. The landlord is obliged to pay this within 14 days of notice. BMT’s Rate Finder calculator finds the effective life and depreciable rate of plant and equipment assets for rental properties which can assist with disputes over damaged assets and maintenance and replacement scheduling. Call BMT on 1300 728 726 for more information.

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How property investors can prepare for the new financial year

BMT team — Thu, 06 Jul 2023 05:56:58 +0000

With the arrival of the new financial year, property investors have a prime opportunity to assess their investment strategies and make smart financial decisions. One important aspect to consider is the use of depreciation deductions, which can significantly improve the profitability of an investment. In addition to depreciation, there are several other strategies which can help property investors enhance their investment returns. In this article, we explore how the following can help investors prepare for the new financial year: Understand depreciation and the importance of claiming Engage a quantity surveyor Evaluate property improvement opportunities Review investment loan structures and interest rates Seek expert financial advice 1. Understand depreciation and the importance of claiming Depreciation is the natural wear and tear of a property and the assets within it. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim depreciation as a yearly tax deduction. Depreciation is claimable on a building’s structure and permanent assets, referred to as capital works deductions (Division 43). Depreciation is also claimable on the easily removable or mechanical assets, referred to as plant and equipment depreciation (Division 40). Residential houses generate forty years of capital works deductions which are available from the construction completion date and depreciate at a rate of 2.5 per cent per year unless the property commenced construction before 26 February 1987 and after 18 July 1985, in which case the rate is 4 per cent per year. Plant and equipment assets are depreciated over their effective life, with the rate of depreciation determined by the investor’s chosen method: diminishing value or prime cost. Investors can select the diminishing value method, which allows higher deductions earlier in the asset’s effective life, or the straight-line or prime cost method, which distributes deductions more consistently throughout the asset’s effective life. Changes to depreciation legislation in 2017 mean owners of second-hand properties are no longer eligible to claim deductions for previously used plant and equipment assets if the property is purchased after the 9th of May 2017. This doesn’t affect brand-new properties or newly purchased assets. By claiming depreciation, investors can reduce their taxable income, leading to an improved tax return and improved cash flow. 2. Engage a quantity surveyor Understanding depreciation and the importance of claiming is important, however, it’s also important to engage a qualified quantity surveyor, such as BMT Tax Depreciation. Quantity surveyors are one of the few trained professionals that hold the training required to accurately calculate construction costs. A quantity surveyor will identify all depreciable assets within a property and determine their depreciable value. Their expertise and knowledge of the latest legislation changes will ensure property investors maximise their deductions compliantly. BMT Tax Depreciation conduct physical site inspections, so that all schedules are maximised and fully compliant. Our data from inspections show that 66 per cent of residential investment properties have had some form of renovation or addition that qualify for depreciation. 3. Evaluate property improvement opportunities The new financial year presents an excellent opportunity for investors to assess an investment property for potential improvements. Investors should consider renovations or upgrades which could enhance the property’s value, increase rental income, or improve energy efficiency. These improvements will likely qualify for additional depreciation deductions. It’s important to keep in mind that different improvements will generate varying deductions in both divisions. Investors should consult their quantity surveyor or accountant to determine which improvements will best meet their goal intention, whether this is to increase deductions or to complete surface-level improvements to increase rent. 4. Review investment loan structures and interest rates Investors can take advantage of the new financial year by reviewing their investment loan structures and interest rates. Consulting a mortgage broker or financial adviser to explore opportunities for refinancing or renegotiating lower interest rates can reduce interest expenses and improve cash flow while also increasing the overall return on an investment. Investors should consider whether restructuring an investment loan, switching to a different lender or renegotiating terms can better align them with their investment goals. For instance, an interest only loan with offset accounts could reduce repayments while interest rates are comparatively high. 5. Seek expert financial advice Navigating the complexities of property investment and taxation requires professional guidance. Investors should seek advice from a qualified accountant, financial adviser and quantity surveyor who specialises in property depreciation. These professionals will provide personalised strategies tailored to an investor’s specific situation, ensuring compliance with tax laws while maximising deductions. By taking a proactive approach, staying informed, and leveraging professional expertise, property investors can position themselves to successfully reach investment goals in the new financial year. Property investors wanting to prepare for the new financial year by claiming maximised depreciation should get in touch with BMT on 1300 728 726 or Request a Quote.

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Office renovation depreciation – case study and tax benefits

BMT team — Tue, 19 Apr 2022 06:54:06 +0000

With ‘working from home’ arrangements more commonplace since the start of the pandemic and social distancing now the norm, many businesses have recently altered their office layouts. Office renovation depreciation has always offered lucrative tax deductions. But since temporary tax depreciation incentives were introduced, office renovation has become even more attractive for the businesses that occupy them. In this post we discuss what’s happened in the office sector since the onset of the pandemic and look at an office renovation depreciation case study. Contents: Demand for office space since the pandemic Office renovation depreciation case study Demand for office space since the pandemic Since early 2020, companies have been faced with the incredible challenge of shifting their office-based employees to working from home arrangements, to adhere to state-mandated COVID-19 rules put in place to protect peoples’ health. Lockdowns and work from home orders lasted for months in some states, resulting in a great deal of office space going unused for prolonged periods. Many people held the expectation that more businesses would continue to employ either a full or hybrid working from home model, leading them to think that ongoing demand for office space would be lower than pre-pandemic. And while there was a sharp drop in demand initially, what is interesting is that demand for office space has rebounded, despite working from home arrangements still being in place for many businesses. Ken Morrison, Chief Executive of Property Council of Australia, said “While aggregate vacancy levels have risen slightly from 11.9 per cent to 12.1 per cent, the driver of this has been new supply of office space, not a drop in demand. The reality is that most CBD businesses continue to see the office as integral to their future, and that is reflected in the increased demand for office space over the past six months.” So, what is driving this demand? It appears that many businesses are not just growing in staff numbers but are needing more space to accommodate for social distancing measures, even in those businesses where employees work remotely for part of the week. While we can’t predict how long this will continue, we can rely upon the lucrative depreciation deductions available on office buildings and fit outs. Depreciation case study ‘Business A’ is a medium-sized business entity. It leases office space occupying a partial floor of a Sydney office tower. The space was originally fitted out in 2018 (prior to the COVID-19 pandemic) and is now going to be expanded to accommodate larger collaborative workspaces, social distancing and future growth in head count. The following table demonstrates the depreciation deductions available for the owner of the property (the landlord) and the business operating from it (Business A, the lessee). These deductions provide a healthy boost to cash flow for both Business A and the landlord. Note the large boost in deductions for Business A in year five, which takes into account the instant asset write-off for some of the new fit out. Some of the larger immediate deductions available to Business A from the Year 5 expansion include $60,000 for computer equipment, $33,000 for floor coverings and $14,000 for desks. Meanwhile, the landlord can continue to claim capital works deductions and plant and equipment depreciation on items such as air conditioning, lighting, switchboards and automatic doors. Tax depreciation schedules are key to claiming the maximum depreciation deductions. A BMT Tax Depreciation Schedule ensures commercial depreciation deductions are claimed to their full potential and compliantly by applying all industry-specific legislation. BMT also adopts current business incentives including the backing business investment and temporary full expensing depending on the business size, to ensure every cent is claimed. BMT Tax Depreciation has optimised its commercial process to ensure both owners and tenants claim the most deductions possible. To learn more about commercial depreciation of offices, call BMT today on 1300 728 726 or Request a Quote.

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Buying your first home vs investment property

BMT team — Tue, 01 Mar 2022 02:57:38 +0000

You’ve saved enough for a home loan deposit, but not enough to buy a property in your dream suburb. You’re now faced with the choice between continuing to save so you can live where you want or buying an affordable property in a less desirable area to get a foot on the property ladder. So, what do you do? This is a common problem facing many Australians who have yet to enter the property market. With house prices having risen at astronomical rates, saving enough for a minimum home loan deposit in many capital cities has become out of reach for many. Fortunately, there is a strategy that can help first home buyers to get a leg up on the property ladder. Buying an investment property first Rentvesting is becoming an increasingly popular home-owning strategy. Rentvesting is when individuals purchase an investment property in an area they can afford, whilst renting a place where they want to live but can’t afford to buy. As a first home buyer you may not be in the financial position to purchase a home in the area you necessarily want to live in. For instance, you currently rent an apartment in Sydney CBD, work in the city and your social life consists of living in the city, but you cannot afford to purchase a home in that area. You could continue to save for a deposit, hoping one day you save enough. Although, this may take many years or even become impossible due to the constant surge of home prices. Alternatively, you could rentvest. This option gives you the opportunity to get into the property market whilst keeping your lifestyle. Let’s say you saved enough for a deposit in a developing regional area with expanding infrastructure and a growing population. Areas like this can be a great investment and bring valuable equity as the house value has potential to increase at a consistent growth rate. After equity has grown, this asset will assist by strengthening future home loan applications and provide security for banks. In turn, this means you could afford a home in your dream suburb a lot sooner than it would have taken to save for the deposit. Benefits of rentvesting include being able to enter the property market sooner, having the flexibility to live in a more enticing area, wealth and equity buildup, increase of cash flow, and possibly, cheaper rental payments than a mortgage. Other advantages include tax deductions like negative gearing and depreciation. By depreciating investment properties, owners can reduce their taxable income resulting less tax to pay. Similarly, negative gearing is when the cost of owning an investment property outweighs the annual income it generates, resulting in a lowered taxable income. Alongside the benefits, there are some possible downsides to this strategy. These include the instability of being a renter, ongoing rental payments, capital gains tax (CGT) incurred if you decide to sell, loss of government First Home Owner grants and higher interest rates that come with property investment home loans. It’s important to highlight that rentvesting may not be an option for individuals seeking First Home Owner Grants. Homeowners must live in their newly purchased home within twelve months for a minimum of six consecutive months before it can be used as an investment property. Best of both worlds It’s possible to have a bit of both worlds with the option of renting out a room or area of a home. Live-in landlords are becoming more common as the need for single room rentals are increasing. This is attractive for students or individuals and may be more practical in cities or areas with local universities. When renting out a room or area of the home you are entitled to claim a portion of living expenses including internet, water and electricity rates, council rates, interest on your mortgage, body corporate fees and property depreciation as tax deductions. It’s always best to speak to a trusted accountant so they can assess your financial position. It’s also important to get a tax depreciation schedule prepared. BMT’s specialised quantity surveyors will ensure all depreciation claims are maximised. And don’t forget, the cost of the schedule is fully tax deductible. For more information on how to claim depreciation on investment properties, contact BMT Tax Depreciation on 1300 728 726 or Request a Quote.

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Can I claim tax deductions while building an investment property?

BMT team — Tue, 30 Nov 2021 22:10:13 +0000

Building an investment property from scratch allows you to build the property best matched to your investment goals. But can you claim tax deductions while its under construction? The short answer is – ‘it’s complicated’. But the way in which you build it can make a big difference to tax deductions down the track. Benefits of building an investment property Building an investment property requires time, patience and most of all the funds. But doing the hard work now can pay dividends in the future. There are some key benefits of building your own investment property. 1. Tenant appeal: While it’s your house, your future tenants will make it their home. A newer property will give them a fresh slate and make them more inclined to stay long term. 2. Rent return: A newer property will demand a higher rental rate compared to a similar, older property in the same area. 3. Energy efficiency: Older housing stock, especially those that were built before energy efficiency measures were in place, produce a huge amount of emissions. Newer properties are proven to be more environmentally friendly. 4. Depreciation deductions: New properties and high depreciation deductions go hand-in-hand – but more on this later. Tax deductions while building an investment property The Australian Taxation Office (ATO) is very clear about tax deductions while building an investment property. Once a ‘substantial and permanent structure’ is built on vacant land, tax deductions still cannot be claimed until it can legally be occupied and is genuinely available for rent. Case study Ashton owns a residential block of land and he is planning on building an investment property on it. He has engaged an architect for the building, poured the concrete slab for the house and has fenced the land’s perimeter but it doesn’t hold any substantial or permanent structures. He purchased the land outright and is yet to obtain a loan for the construction of the building. Since the property is also residential, deductions won’t be available until it is lawfully able to be occupied and rented or available for rent. There are some instances where an expense can be claimed during construction as it is directly related to the intent of renting, such as interest on loans or landlord insurance . However most expenses that are made during the construction of a property will most likely will form part of the property’s cost base, construction cost or will not be claimable. Therefore, we recommend discussing this with an accountant for the most accurate advice. It’s still important to keep tax deductions in mind when building a future investment property. The choices you make during the build will make a significant difference to the future depreciation deductions you can claim. Why should depreciation be considered when building an investment? Depreciation is the natural wear and tear of a property and its assets over time. Property investors can claim the depreciation of their rental properties as a tax deduction each financial year. It’s well-known that new properties often produce significantly higher deductions than their older, second-hand counterparts. This is due to two key factors. Firstly, 2017 legislation changes impact what plant and equipment assets can be claimed as depreciation from a property. Under the changes, pre-existing plant and equipment assets from a second-hand property purchased after 9 May 2017 are ineligible for depreciation. Obviously, newly built properties aren’t impacted by these if you don’t live in the property before renting it out. The second factor is around capital works deductions. These deductions are available on a property’s structure and fixed assets like door handles and benchtops. Any residential property constructed after 15 September 1987 will have capital works deductions available. Order an estimate while you’re waiting on the build If you have most of the details of the property now but are still waiting for it to be built, you can still get a good idea of the depreciation deductions you can claim. BMT Tax Depreciation provide obligation-free depreciation estimates for any type of property in any stage of construction if the baseline details are available. Contact BMT today on 1300 728 726 or Request a Quote.

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Here is what you need to know about inheriting an investment property

BMT team — Mon, 11 Oct 2021 22:44:08 +0000

People who find out they are inheriting an investment property have important decisions to make. In this article we look at two of the options – to keep using the property as an investment before selling it or to live in it before selling it. Each scenario has its own unique factors to consider, including taxation implications. Scenario one: Continue to use property as an investment before selling This could be a good way to either grow an existing investment property portfolio or get a step on the property investing ladder. But it’s important to understand the tax implications. Firstly, any rental income received from the property will be taxable income for the new owner. Tax deductions associated with the property, such as interest repayments, insurances, council rates, maintenance costs and property management fees, will also be deductible for the new owner. To claim the costs associated with the property at tax time, property owners are required to keep records of the costs. But how do they claim depreciation, which doesn’t require a financial outlay? Depreciation is the natural wear and tear of property and assets over time. Owners of income-producing properties can claim this depreciation as a tax deduction each financial year. To do this, they need a tax depreciation schedule prepared by a specialist quantity surveyor. This is a report that outlines every depreciable item of the property, which an accountant uses to determine the depreciation deduction. The new owner also needs to be aware of the capital gains tax (CGT) implications at the time of sale. Paying CGT when inheriting an investment property is complicated and largely depends on how the property was used and how long the new owner held the property before it was sold. These are the main contributing factors of whether the property will be fully or partially CGT exempt, or not at all. If the property was purchased before 20 September 1985 (the date that CGT was introduced) and the new owner sold it within two years, then the property is fully exempt from CGT. It gets slightly more complicated where a property was purchased after this date. If the property was purchased after 20 September 1985 , and if the new owner acquired the investment property after 20 August 1996, then a full CGT exemption won’t be available. However, they may be able to get a partial exemption and the individual’s accountant will assess this when it comes time to calculate any CGT. Scenario two: Live in the property before selling it The first thing to know in this scenario is that a current fixed lease must be honoured. This means the present tenant can stay at the property until the lease period ends or an earlier date is agreed to by all parties. It’s important that the new owner remembers that while the property is still leased, they can claim tax deductions even if it’s not for a full financial year. Pro-rata deductions can be applied to any type of tax deduction including interest repayments and depreciation. If the property is the new owner’s main residence prior to sale, they will be partially CGT exempt. The only scenario where a full CGT exemption would apply would be if the property was the previous owner’s main residence and it hadn’t been rented out. For more information on how to make the most out of an inherited investment property, contact BMT on 1300 728 726 or Request a Quote.

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Find out if you can sell a property with a tenant in it

BMT team — Wed, 16 Jun 2021 01:39:14 +0000

Ever wondered if an investment property can be sold while the tenants are still in it? The short answer is yes. But there are several things to consider when selling a property with a tenant in it successfully. Considerations when selling a property with a tenant in it 1. Fixed vs periodic leases First, understand the tenants’ rights under the lease type. A landlord can’t terminate a fixed-term lease simply to sell a property. A fixed term lease is when both tenant and landlord have agreed to a specific length of tenancy, for example, 12-months from 1 June 2021 to 1 June 2022. If a fixed-term lease is in place, neither the current nor the future owner can make the tenant leave without a breach of their lease. If the fixed-term lease has ended, the tenant is still entitled notice to vacate. This notice period can change depending on the state or territory the property is in. If the tenant is on a periodic (ongoing) lease, they can be asked to vacate once contracts are exchanged but the required notice period must be given, which can be go up to 90 days. Having to find a new place to live could be extremely stressful for the tenant, so be considerate and give as much notice as possible. If the property is sold, the new owner will also be bound by these requirements. They must honour a fixed lease and provide all relevant notice periods. 2. Incentives If the goal is for the tenants to stay during the selling period, offering incentives to stay may help. An incentive could come in the form of reduced rent, free yard maintenance or end-of-lease cleaning. Remember, expenses such as cleaning and maintenance are fully tax deductible to the investment property owner. 3. Open homes The tenants are probably used to having a routine inspection every six months. Once the property is for sale, inspection frequency can change to weekly or even several days a week. Having prospective buyers through the home on a regular basis is an inconvenience to tenants. Make it easier by giving plenty of notice (more than the required minimum when possible), adhering to time restrictions on access and by maintaining communication with the tenants. It’s also important to note that auctions cannot be held on the premises without the consent of the tenant. 4. Tax deductions If the property is ‘genuinely available for rent’, all tax deductions can be claimed. This includes interest repayments, insurances and depreciation deductions. If tenants are staying while the property is for rent, these tax deductions can still be claimed until the property is sold. But if the tenants have vacated and the property remains empty, they can’t be claimed as the property is no longer ‘genuinely available for rent’. A BMT Tax Depreciation Schedule allows you to claim depreciation deductions for the lifetime of your investment property – from as soon as it’s advertised for rent, until the very end while it’s genuinely available for rent until it’s sold. To learn more about BMT and their investment services, contact the team on 1300 728 726 or Request a Quote.

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What is an investment property and how to make it an income-generating machine

BMT team — Tue, 09 Feb 2021 22:09:01 +0000

Media outlets across Australia report on the property market daily. Housing price movements, sales volumes, affordability and buyer sentiment all make the news regularly. The investment property market is often part of the discussion, but let’s go right back to basics – what is an investment property? And more importantly what makes a good investment? How can a prospective investor make the most out of their property? What is an investment property? An investment property is a residential or commercial property used to actively produce income, otherwise known as rent. Seems simple, right? However, a number of factors determine just how successful an investment property will be. In this article, we will cover Types of investment properties Investment property income How to get the best return Types of investment properties Investment properties come in all shapes and sizes from houses, units, townhouses, duplexes to offices, warehouses, hotels and other types of commercial properties. When it comes to deciding what type of property to invest in, it really depends on your investment strategy and budget. Strata properties are usually a good starting point for first-time investors as they are sometimes more affordable. Meanwhile, owning an investment property with someone else can be an affordable way to enter the market while splitting ongoing costs. Investment property income Rental income and capital growth are the two main ways investment properties generate money for their owners. 1. Rental income Rent is the amount the tenant pays to the property owner (landlord) to occupy the premises. It is a regular source of income for the owner, although it can fluctuate with the rental market and tenant reliability – so it pays to do your research. Vacancy rate is a good indicator of rent reliability. For example, a high vacancy rate means there’s less demand for rental properties in the area. While a lower vacancy rate means there’s higher demand and rental rates can move up. Therefore, it’s important to check the vacancy rate in the area you’re looking to invest in. There are also tax benefits of owning an investment property that boost rental income further throughout the time it’s available for lease. You can claim many tax deductions in relation to owning the property, which will reduce your taxable income. Just some of the things you can claim as tax deductions include interest repayments, depreciation, property insurances, rates, repairs, maintenance, management fees and much more. 2. Capital growth It is important to understand that any property investment can be affected by market price fluctuations; the value of your property can rise and fall. But the goal of any property investor is capital growth. This is the increase in the value of their land and property over time. The outcome of this is when the time comes to sell the property, the owner may make a significant profit (or loss). Depending on the investment strategy, some may favour long-term capital growth over short-term rental income, others may be more interested in weekly cash flow. How to get the best return from an investment property Now that we are across what investment properties are and how owners make money from them, how do they maximise the return? Here are some of the key strategies savvy investors do. Strong rental returns vs strong capital growth Strong rental returns and capital growth usually work against each other. The key to getting the balance right is holding properties that are mixed or choose a location that it suitable for your overarching investment strategy. Attract high-quality tenants The rent you receive is what maximises your return throughout the lifecycle of your investment property. Therefore, it’s key to make sure that this flow of income is reliable and at market value. Finding high-quality reliable tenants is the key to safeguarding your rental income. Attracting these tenants from the very beginning is essential, while keeping them happy throughout the tenancy will increase the likelihood of them staying. Even the small tasks like getting repairs sorted quickly and efficiently, maintaining the property ang giving appropriate notice prior to inspections go a long way in keeping tenants happy. Make improvements wisely to accentuate returns Renovating an investment property is a costly exercise, but when done wisely can help you achieve the balance of increased rental returns and the overall value of the property. Achieving bang for buck is the trick to doing this; make improvements that will help attract high-quality tenants while increasing the amount of rent you can charge. These don’t necessarily need to be extravagant additions. For example, adding a functional internal laundry, a separate bath and shower in the bathroom or a quality stove and oven. Claim all deductions Holding an investment property means you have access to more tax deductions. Claiming these is key to boosting the return you receive from your property. It doesn’t need to be a hard paper-tracking practice and tools such as MyBMT help you keep track of all expenses and share them directly with your accountant. Claiming the hidden expenses can boost your cash by thousands in just one year. The biggest hidden deduction is the depreciation available from the natural wear and tear of the property and its assets. Depreciation isn’t easy to see as you don’t need to spend any money in order to claim it, making it a non-cash deduction. The table below demonstrates just some depreciation deductions you can expect for both new and old properties. BMT Tax Depreciation has helped hundreds of thousands of property investors get the best return through lucrative depreciation deductions. If you’re contemplating buying a property for an investment, contact BMT for an obligation-free estimate of the likely deductions you can claim on 1300 728 726 or Request a Quote.

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10 tips on how to buy more investment properties

BMT team — Tue, 02 Feb 2021 22:11:56 +0000

Property is a stable, long-term investment that can boost your cash flow significantly. Some of the most successful property investors hold multiple properties in their portfolios, generating several cash flow streams and amplifying capital growth. With over twenty years of experience in the property industry, here are ten tips we see being used to help grow a portfolio. 1. Assess your investment strategy and current portfolio First and foremost, any investment property you buy needs to complement your investment strategy. Look at how it will impact your ongoing cash flow, your future equity and how it fits into your longer-term goals. For example, if your strategy is to achieve a diversified portfolio, then purchasing multiple properties in the same area isn’t aligned with this strategy. If the above example is similar to one of your goals, it’s important to remember that some areas give stable rental returns, with high rental yields. While other areas offer lower yields but a higher likelihood of capital growth based on supply and demand. Holding a mixture of properties in these different areas is just one way of diversifying your portfolio. 2. Leverage existing equity Equity is gained through either capital growth or by paying down the principal of the existing loan. You can leverage the existing equity in your current investment property to buy a new one. The amount of equity you have is the property’s value minus how much you owe. The easiest way to understand how to leverage existing equity is through this simple example: Dan purchased an investment property for $450,000 in 2015 with a 20% deposit ($90,000) and a $360,000 mortgage. This means the property’s current equity is $90,000. Over five years, Dan pays a further $90,000 off the home loan’s principal, which means he now has $270,000 owing, plus the property’s value increase to $500,000. Dan’s equity in this property is now $230,000 ($500,000 minus $270,000). Dan can use this equity to refinance and place a deposit on a second property. It’s important to note that financial institutions usually like owners to maintain a loan value ratio (LVR) of at least 80 per cent. So in the above example, a portion of the equity can be used if a LVR of 80 per cent is maintained. Using a property’s existing equity can have some financial implications, such as Lender Mortgage Insurance being required on a refinanced loan. Therefore, it’s always recommended to seek professional advice before doing so. 3. Save, and save more You can’t rely solely on your equity to build your property portfolio. It’s important to have savings ready. One way to do this is to use the excess cash flow produced by your first investment property wisely and towards savings for another deposit. Another option is investing in safe, short-term investments that will help you grow your savings. When considering how to use your savings, it’s important to consult with a trusted financial professional who can help you reach your financial goals. 4. Assess the current property market and cycle You can’t predict the future. While the property market has proven resilient in recent times, the unexpected can always happen. Keeping up-to-date with the market and property trends is important when making your next investment move. This includes not falling into the trap of being sucked into media hysteria following a bad week in the market. Ensure you’re informed by reputable sources such as CoreLogic, SQM research and government sources such as the Australian Bureau of Statistics. MyBMT is also a free, helpful tool that has a property research and insights feature. 5. Don’t let your current property plateau Don’t ignore your current investment property as you look to grow your portfolio. This property can still be a powerhouse when it comes to boosting your returns and building your equity over time. Get your property revalued on a regular basis and add value through a solid maintenance plan and if required, renovations. Smart renovations can help you gain equity quickly, while if the property goes up in value it can mean you have access to more equity for investing. 6. Shop around for the right loan With interest rates at record lows, it’s important to shop around for the best loan that suits your investment strategy. Don’t just look for the best interest rate. Each loan is different, with varying terms and conditions, so its key to do the research. Speak to your lenders and consider going through a reputable mortgage broker. A good mortgage broker can help you get the best deal and save you money in the long run. 7. Don’t rule out cheaper properties Keeping updated with the property market means you can find hidden gems in areas with strong rental returns but lower property prices. Buying properties in these areas mean you could potentially buy two for the price of one in a more expensive area. Another option could be selling your first investment property if it’s experienced strong growth and buy two cheaper properties with the funds. When doing so, it’s important to consider the rental yield versus capital growth scenario, as cheaper properties sometimes experience slower capital growth. But this all comes back to your investment strategy as in the earlier years your strategy may be focussed on growth, while rental yield might become more important to fund the retirement stage of your life. 8. Consult with your property investment team Given that you’re looking to buy more investment properties, it’s fair to assume you already have at least one that’s a success. A professional property investment team is key to a successful investment property, and consulting with them can provide you with both guidance and a solid plan of attack. Your team could include your accountant, financial planner, property manager, real estate agent and specialist quantity surveyor. 9. Consider joint ventures Pairing up with someone with similar investment goals as you can be a more affordable option to add to your portfolio. Not only does it mean your upfront costs are less, the ongoing costs of […]

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What is mixed-use property and how to claim maximum deductions from it

BMT team — Mon, 01 Feb 2021 22:08:11 +0000

If you’re a property investor wanting the best of both worlds, investing in mixed-use property could be your answer. Mixed-use property provides the option of investing in different commercial and residential sectors simultaneously. As the population grows and space in high density urban areas reduces, mixed-use properties are becoming more common. In this article, we cover: What is mixed-use property? Is mixed-use property a good investment decision? Depreciation for mixed-use properties What is mixed-use property? Mixed-use properties are those that are zoned for more than one purpose. A mixed-use property can be a combination of commercial property types, or commercial and residential. For example, a property could be a blend of office spaces, retail stores, hospitality establishments and residential. Is mixed-use commercial property a good investment decision? Determining whether a mixed-use property is a good investment decision should always be considered on a case-by-case basis. Pros Diversifying portfolio and minimising risk Using one property to enter different commercial and residential markets is a solid way to diversify your portfolio without spreading yourself too thin. When done correctly, portfolio diversification can result in risk minimisation as you’re not dedicating all investments to one basket. Different tenant markets Tenant supply and demand is key to investment success. While demand may be lower in one market, it could be surging in the next. Mixed-use investment properties can benefit from this; if one market is unpredictable, the other can make-up for its weaknesses. Added convenience When planned out appropriately, mixed-use properties can create a convenient community for tenants. This can often be a drawcard when attracting high-quality tenants to occupy the property. Cons Further complexities Setting up a mixed-use property can be more complex than singular use. For example, the site where the property is built must be zoned for mixed use. Building regulations can also change between residential and commercial properties. Upfront costs There’s no doubting that investing in property can be a costly exercise, especially in the beginning. There can be additional upfront costs associated to mixed-use property. Therefore, it’s important to analyse your financial position and factor in all costs, from pre-purchase inspections, deposits, finance, to ongoing expenses such as legal fees into your investment strategy. Appropriate financing options Finding a loan for a mixed-use property isn’t necessarily a negative but it’s a key consideration as mixed-use property loans differ from loans used for a singular property type. Lenders may consider the loan as commercial or residential, depending on how the property will be set up. Each loan will have different features and require different levels of security and serviceability, so it’s essential to shop around and be aware of alternative offerings. Depreciation for mixed-use properties Depreciation is the natural wear and tear of a property and its assets over time. Investors of income-producing properties, whether they be residential, commercial or mixed-use, can claim depreciation as a tax deduction each year. Mixed-use property depreciation is unique. Certain legislative and industry-specific requirements must be followed. For example, the same asset in two separate commercial industries can depreciate across different periods of time. If the mixed-use property had retail shop space and restaurants, the carpet would depreciate across eight years in the retail section and five years in the restaurants. Depreciation for mixed-use residential and commercial properties Legislative requirements become even more complex when the mixed-use property blends residential and commercial, as depreciation rules differ significantly. The first and most significant is that both commercial tenants and owners can claim depreciation. This means the owner claims depreciation on the building’s structure and assets they own while the tenant can claim depreciation on their fit-out. But on the residential side, only the owner can claim depreciation. Complex depreciation legislation for both capital works and plant and equipment also applies differently between commercial and residential investment properties. Capital works is a deduction for the property’s structure and any fixed assets like gutters and windows. These deductions are available on the original structure of a residential property where construction commenced after 15 September 1987, but this eligibility date changes to 20 July 1982 for commercial properties and 21 August 1979 for traveller accommodation. Plant and equipment assets are easily removable or mechanical in nature. Common examples include furniture, lights, window coverings and air-conditioning units. Legislation introduced in 2017 means residential investors can’t claim previously-used plant and equipment assets for second-hand properties (where contracts were exchanged after 7:30pm on 9 May 2017). However, this change doesn’t impact commercial properties and previously-used assets can still be claimed. The complexities of depreciation can be a lot to wrap your head around, and this is why it’s always best to consult with a tax depreciation specialist. For over twenty years, BMT Tax Depreciation has completed comprehensive schedules for all types of properties and applied all legislative requirements to ensure compliance is maintained. To learn more about depreciation for mixed-use properties and how to claim the maximum deductions, Request a Quote or contact BMT on 1300 728 726.

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