» Property Investing Strategies

The only sure money on Melbourne Cup day

BMT team — Tue, 04 Nov 2014 00:45:01 +0000

There’s more cash up for grabs than the prize This afternoon, like everyone else in Australia, BMT will be holding its breath when the winner of the 2014 Melbourne Cup is announced. With $6.2 million up for grabs as prize money and many millions more being thrown down at the betting stations, discussion of the race always comes back to money. Working in an office of tax depreciation specialists, any such talk of money will eventually turn into a discussion of tax deductions. With all the ritz and glamour surrounding the race, the question always raised is what sort of deductions would be available for all that excess? This year we’ve decided to share our answer. Going to the races Flemington Racecourse is one of the largest sport complexes in Australia and certainly sees more money passing through on just this one day than most people will ever see in their lifetimes. It has state of the art facilities that attract racers and spectators alike from all across the world to put their money on the line. However, what if you decided that you wanted a piece of the action and set up your own event to rival the Melbourne Cup? If BMT decided to set up a competing event, with a facility equally as lavish as Flemington Racecourse, it would need a track, stables, member’s area and three massive grandstands. Not including the costs of acquiring enough land to accommodate such a large racecourse, a conservative construction cost estimate of the new buildings would be $100 million. With all that outlay, the tax deductions for the depreciation of BMT’s racecourse would be huge. The below table shows a rough estimate of what could be claimed, provided that we used BMT for the tax depreciation schedule. Punting, BMT style Clearly, if we were ever to create an event rivalling the Melbourne Cup, significant capital raising would be needed. Fortunately we have devised a method to use our depreciation expertise to pick the winner of this year’s Melbourne Cup. Many punters are unaware that racehorses are actually listed as depreciable assets by the Australian Taxation Office. With a little research it is possible to find the purchase price of a number of the horses competing in this year’s race and estimate the deductions available to their owners. What’s more, by looking at the year of purchase it is possible to estimate the remaining depreciable value of each competitor. Our hypothesis is that the horse with the greatest remaining depreciable value will have the winning edge in today’s race. The below table shows our race analysis for 2014. While our predictions seem at odds with conventional bookmaker wisdom, our analysis indicates that Brambles should be the winner by a hair this afternoon. If our depreciation estimates prove to be an accurate way of predicting the winner we could be well on our way to starting our own race event, which we are pleased to announce would be called the BMT Cup. All recommendations given are made solely for entertainment purposes. BMT Tax Depreciation is not responsible for any loss or damages resulting from the above advice.

The post The only sure money on Melbourne Cup day appeared first on .

Are you burying cash in the backyard?

Bradley Beer — Wed, 29 Oct 2014 05:32:48 +0000

Deductions don’t stop at your doorstep We always laugh when we hear stories of people who stick their money in a pickle jar and bury it in their backyard rather than leave it with a bank. The sad fact is that thousands of Australian property investors are doing the same thing by leaving unclaimed tax deductions buried down in the bottom of their garden. Many property investors claim for the structure and assets within their investment property, but overlook the deductions just outside the front door. Property depreciation deductions can be claimed for structures and assets on the outside of an investment property just as much as those inside. To get the most out of your tax deductions, you should always make sure that your depreciation claim includes all outdoor assets on a property, otherwise you could find yourself missing out on thousands of dollars in additional cash flow. Know your deductions The Australian Tax Office (ATO) classifies depreciable items on investment properties into two separate categories; capital works and plant and equipment. If you have a verandah or patio on your investment property, then capital works deductions could be available. Any permanent structures or non-removable assets are claimable as capital works for their effective life, so even a clothesline could yield you some deductions. Below is a list of some common capital works depreciation can be claimed for, but that many investors are missing out on. Plant and equipment deductions on the other hand are claimable for any removable or mechanical fixtures and fittings such as furniture, sheds or exterior lighting. The table below shows some common outdoor plant and equipment items and their potential depreciation deductions to demonstrate the claims you may be missing out on. Appreciation with depreciation If your investment property is on a large plot of land, remodelling the backyard to make the most of the space available is a great way to increase the property’s appeal to potential tenants and purchasers. Property depreciation is a powerful means of recovering some of the cost of these improvements, allowing you to build bigger and better to enhance the gains received from these additions. Don’t get left out in the cold Wear and tear continues to occur on investment properties whether it is being claimed for as depreciation or not. It’s definitely worth checking to make sure you are claiming for the structure and fittings on the exterior of your property to ensure your deductions are being maximised, otherwise a significant portion of your cash flow could be getting left out on the back lawn rather than your back pocket.

The post Are you burying cash in the backyard? appeared first on .

Should you turn your investment property into a doghouse?

Bradley Beer — Wed, 22 Oct 2014 22:58:04 +0000

Pet owners could be your solution to increasing rental yield It’s no secret that property investors hate pets in their investment properties. They can be unpredictable, messy and destructive. It should come as no surprise that internal research conducted by realestate.com.au has shown that approximately only 5% of their rental listings are pet-friendly. However, for property investors concerned with improving their rental yield, reconsidering this preconception could provide thousands of dollars annually in additional rental income. Doing the math Property investors often associate pets with higher maintenance and overall costs, but extensive studies conducted in the US have shown differently. ‘Companion Animal Renters and Pet-Friendly housing in the U.S.’ found that pet-friendly properties are typically leased out in nineteen days, compared to the twenty-nine days it takes on average to find a tenant for a pet-unfriendly property. Assuming weekly rent of $450/week, this already leaves the pet-friendly property owner $641 better off once both properties are tenanted. Australian research has also shown that pet owners are willing to pay between 7-14% more rent for the right to keep their pets. For the purposes of this exercise, this will increase the rent for the pet-friendly property to $500/week. For a twelve month lease, this extra $50 a week will add up to $2,600 in additional income. Pet owners also stay longer; because it is so difficult to find pet-friendly accommodation, they are usually very reluctant to move on. This means that the properties’ owners have half as many vacancy periods to worry about. With an average vacancy period of twenty-nine days for investment properties that do not allow pets, on average this adds up to another $1,859 in lost income. In regards to the costs of additional damage caused by pets, research data has defied expectations by showing that there is little, if no, difference in overall maintenance and repair costs for investment properties with and without pets. Given how difficult it is for pet owners to find accommodation, they have a vested interest in ensuring that no harm comes to any rental property they manage to secure. With so few rental properties allowing pets on the market, the overwhelming demand for pet-friendly properties also allows owners to be far more selective, screening potential tenants and their references to ensure that they are not only responsible pet-owners, but responsible tenants as well. Due to these factors, the total difference in annual damages found in the U.S. research between tenants with and without pets was only $39USD, which was not judged as substantial enough to form a statistical difference, especially considering all the financial benefits received by keeping properties pet friendly. A much more significant cause of property damage, according to the same data, was children. Families with children were found to cause an additional $150USD damages over childless tenants each year. Fortunately, not many property investors were made aware of these results, sparing us from a lot of angry, homeless parents and some very pleased pets. Crunching the numbers, the difference in rental yields of properties that allow, and prohibit, pets ends up looking like this: For investors looking to increase their rental yields, allowing pets on a property is a far more cost effective solution than undertaking a costly bathroom or kitchen renovation. If concerns for damages still weigh on your mind, Pet Agreement Forms are readily available online, allowing investment property owners to more strictly regulate the terms on which pets may be kept on the premises.

The post Should you turn your investment property into a doghouse? appeared first on .

Could depreciation deductions be a clue to the reserve order for The Block Glasshouse auction?

BMT team — Wed, 24 Sep 2014 05:08:34 +0000

Over the last three years, BMT Tax Depreciation has had the opportunity to prepare the tax depreciation estimates for The Block TV show on the various renovation projects they’ve taken on. Each year we have come to expect the deductions to be more than the previous year as the projects get bigger and better and this year is no exception. BMT Managing Director Bradley Beer will be appearing on tonight’s episode of The Block Glasshouse to help blockheads Darren and Dee understand what a property investor could expect in terms of depreciation deductions for their apartment. In presenting the estimated depreciation deductions for each apartment we could be revealing an inside scoop to the order of reserve pricing for all of the apartments heading into auction as it represents the total amount of construction expenditure. So, based on the depreciation deduction range for year one as well as the total minimum and maximum range of depreciation deductions that an investor can expect for each apartment on The Block Glasshouse, could this be the reserve price order also? Watch: Bradley Beer on The Block Glasshouse: Terraces Take Shape

The post Could depreciation deductions be a clue to the reserve order for The Block Glasshouse auction? appeared first on .

Four points to start maximising your deductions

BMT team — Wed, 09 Jul 2014 05:52:07 +0000

Get more out of your depreciation claim with these simple tips A large part of property investing is maximising your tax deductions. While many investors fail to claim tax depreciation, many more may be aware but are missing out by only claiming a fraction of their full depreciation entitlements. Here are four ways property investors could be able to increase their yearly tax deductions by thousands. New and older properties have depreciation claims available As a property gets older, its value naturally depreciates with or without a tax deduction claim. The older a property is, the less value remains to be depreciated and claimed for. A new property allows investors to claim far more depreciation deductions as the property has lost little or none of its original value. Additionally, while plant and equipment deductions can be claimed for all investment properties, capital works deductions cannot be claimed on residential properties constructed prior to 15 September 1987. Learn more: Claiming depreciation for older properties Don’t overlook capital works deductions Statistics released by the Australian Tax Office (ATO) indicate that approximately 2.5 million property investors claimed some form of deduction for the 2011-2012 financial year. Of these, 1.7 million investors claimed property depreciation for plant and equipment, while only 1 million investors claimed deductions for the building’s structure and fixed assets as capital works deductions. If your investment property was constructed from 15 September 1987 onwards and you are not claiming capital works deductions, you are missing out on dollars in your pocket. Even if you haven’t been claiming these deductions previously, the ATO allows two previous tax returns to be amended to recoup missed deductions. Claim renovations completed by the previous owner Anything in the property that occurred in a previous renovation can be estimated by a Quantity Surveyor and deductions calculated accordingly. This includes items that are not immediately obvious, such as an old extension or new plumbing. For capital works to be eligible for the capital works deductions, construction must have commenced within the qualifying dates; after 15 September 1987 for residential properties and from 20 July 1982 for commercial buildings. Get back what you throw away When property investors start watching too much of ‘The Block’ or ‘House Rules’ and begin planning renovations to their investment property, it is little known that they are able to claim tax deductions for assets discarded during renovation. By organising depreciation schedules both before and after the renovation to support their claim, investors are able to claim any remaining depreciation from the items being removed and start claiming depreciation on the newly installed items. For savvy property investors, property depreciation offers significant tax allowances. The above four tips are just a few of the ways that a comprehensive and accurately prepared depreciation schedule can help improve an investors’ cash flow. Want to know more? Call us on 1300 728 726 or complete this form and we’ll be in contact with you to discuss your property.

The post Four points to start maximising your deductions appeared first on .

Sky News Business BMT Tax Depreciation on Your Property Empire – 18/04/2014

Bradley Beer — Tue, 29 Apr 2014 07:08:46 +0000

If you missed the last edition of Your Property Empire special on depreciation you can watch it below. Chris Gray of Your Empire with myself discussing all things depreciation; what you need to know to get the most deductions and to maximise the cash flow on your investment property. Comment below if you have any further questions, or if you need a quote click here.

The post Sky News Business BMT Tax Depreciation on Your Property Empire – 18/04/2014 appeared first on .

The benefits of making a depreciation claim for student rental property owners

Bradley Beer — Fri, 21 Feb 2014 06:21:22 +0000

The month of March ushers in the autumn season, marks the kick off to the footy season and echoes the bustling sounds of higher education institutions bubbling and frothing with hope and potential. For 223,200 students, 2014 will be their first year of university, taking the total of university students around the country to over 1 million. This means demand for student rental property accommodation has become quite competitive between students and families looking for well situated properties. Student accommodation is increasing in demand as Australia becomes the third most popular international student destination behind the United States and the United Kingdom. Student accommodation is an asset class with potential, but caution is advised when considering investing in student rental property. Here are a couple of points to consider: Higher management fees Screening for the right tenants Read more: How to survive and profit from property’s student boom Many student rental property investors are often unaware they are eligible to receive significant taxation benefits. Research has shown that nearly 80% of all property investors fail to take advantage of property depreciation, and therefore miss out on thousands of dollars in available deductions. BMT complete tens of thousands of depreciation schedules for investment properties each year. On average, those schedules find between $5,000 and $10,000 as a first full year deduction for rental property owners. This is no small amount, so for investors wondering what is property depreciation and how can they go about making a claim, I’ll explain. Property depreciation is a non cash deduction the Australian Taxation Office (ATO) allows the owner/s of an investment property to claim due to the wear and tear of a building structure and its fixtures and fittings over time. It is described as a non cash deduction because the investor does not need to spend any money to be eligible to claim it. The following scenario provides one example of an investor’s cash-flow with and without depreciation. This investor owned a property purchased at $420,000, with a rental income of $490 per week and a total income of $25,480 per annum. They had expenses for the property such as interest, rates and management fees totaling $32,000 By claiming property depreciation the owner was able to turn their negative cash-flow position into a positive one. Without depreciation they were paying out $79 per week. By taking advantage of taxation legislation and making a depreciation claim, the investor was able to turn their loss to an income of $3 per week. In total, BMT Tax Depreciation saved this investor a total of $4,255 in just one year. I recommend that you contact a Quantity Surveyor, such as BMT Tax Depreciation, to compile a tax depreciation schedule. The Quantity Surveyor will perform a site inspection and take photos of all plant and equipment to ensure no depreciable asset is missed. They will also use their knowledge of current ATO legislation to select the best methods to calculate depreciation to maximise the claim available for the owner. For a free over the phone assessment of the likely deductions for an investment property that is being used as student rental accommodation, please contact one of my professional staff members on 1300 728 726 or complete this form to request an estimate today.

The post The benefits of making a depreciation claim for student rental property owners appeared first on .

The RNR formula to avoiding the most common investing mistake

Bradley Beer — Fri, 14 Feb 2014 03:36:01 +0000

As the Managing Director for BMT Tax Depreciation, I have the privilege to travel around the country helping to build a community of smarter property investors and real estate professionals. In the process of discussing depreciation with investors and real estate professionals and the hidden cash benefits tied up in the depreciation of investment properties, I often get the opportunity to talk to them about various investment strategies. In the beginning, what was at first a surprise is now perhaps the most common mistake I hear and see investors make when purchasing a property. The mistake many investors make is that they have no overall strategy. The reason I think is because they have no clarity of what exactly it is they’re trying to achieve through investing. So whether it’s investing or setting life goals, I want to share with you a 3 question strategy which I call the RNR formula. I use it to get a clear picture of which strategy I would need to use to achieve a particular result or goal. RNR Real Deal Need To Results Focused 1. Real Deal Having a reality check or taking stock and understanding where you are in terms of your wealth, health and relationships is the first step. As the proverbial saying goes “the truth will set you free”. It will also get you on your way to wealth creation or financial freedom. Here are some personal finance truths to get you started as an investor. What is my net wealth? Calculate my net wealth What is my lending capacity? Calculate my lending capacity What income streams do I have available to me? View video on Cashflow Quadrant Collate all of this information and you’ve got a good foundation to build on. Healthy or not, the main thing is you’ve got a starting point. 2. Results Focused Now that you know what your personal balance sheet looks like, it’s time to take a good look at what you really want in life. I know “N” comes next in the formula but you have to know the result you want before you can determine what you “Need” to get you there. Most people can tell you what they don’t want, but find it hard to tell you what it is they actually want in life, mainly because they’ve never taken the time to define it with clarity for themselves. In determining the results you want in life. The big problem here is people often mistakenly define means goals as end goals. By this I am referring to end goals as the results you want for your life. End goals are the experiences you want to have in life where time and money are not a factor. What do I want to experience in life, how do I want to grow as a person, how can I contribute in life and to the world? Means goals are the goals that get you there, so if financial freedom is an end goal or your desired result, the means goals could be; get an education, get a job, build a business, invest in shares or invest in property. This is a very important distinction to make. Not knowing what results you want in your life can be a source of frustration for many. Knowing is the starting point for formulating your strategy for life, personal growth and investing. In his book 7 habits of Highly Effective People, Dr Stephen Covey talks about the difference between means goals (working towards) and end goals (the actual goals or desired outcomes). To help his readers understand this point he introduces the second habit which is “Begin with the End in Mind” which focuses on choosing these goals. In illustrating this second habit Dr Covey uses the analogy of a funeral. Imagine attending a funeral service, it’s an open casket funeral and as you look into it you see yourself. You also see your family, friends and co-workers grieving while giving a eulogy of your life, how would this make you feel? What would you want them to have said about you and the person you were, how do you want them to remember you? If you look to the end of your life, what do you expect to have accomplished? What kind of life do you wish to have lived? Most of us would want to be seen in a good light and be remembered as a loving, generous and successful person, who was rich in spirit and bank account and much loved by those people around us, or then again you might prefer to be a lying, cheating scumbag, though I doubt that very much. Here’s an exercise to help you determine your end goals or what it is you really want from life. Take some time to answer the following questions, you can add other people or groups to the list. What do you want the following people to say about your life? Family Friends Co-workers Community The second part to this exercise is to evaluate your current goals in light of your newly discovered end goals, are they aligned? Now look at your current life. Make a list of your current goals, this list along with your personal balance sheet should give you a clear picture as to where you are at in life. Now compare the two; are your present goals and desires in line with how you want to be remembered at the end of your life? If so then you are on the right path and you’ve aligned your means goals with your end goals. If not, then you might want to re-evaluate changing what you’re currently doing if it’s not taking you to your end goal. By beginning with the end in mind, you can determine if your current direction and investment strategy is right for you. You can help reinforce this by writing a personal mission statement that aligns your means goals with your end goals. Habits […]

The post The RNR formula to avoiding the most common investing mistake appeared first on .

Four tried and true ways property investors make their money

Bradley Beer — Fri, 09 Aug 2013 06:28:24 +0000

Property investors often ask whether their strategies should be influenced by recent market conditions. As Benjamin Franklin once said, “an investment in knowledge pays the best interest.” So it’s also logical to say that investors who do their research and increase their knowledge about the property market will also see better results from the strategies they put into place. That being said, no matter what the external market conditions, there are always tried and true factors that a property investor should be aware of. Which leads us to the four ways property investors make their money, as mentioned in the latest article from Metropole Property Strategist, Michael Yardney. The four ways property investors make their money: Capital growth – the increase in value of their properties Rental returns – which provide cash flow Tax benefits – such as depreciation allowances and negative gearing, and Forced appreciation – this is where an investor ‘manufactures’ capital growth through renovations or development. Whether you’re a first time investor, you already own an investment property, or you’re planning on buying your second or even tenth investment property, it’s important to consider all of the above factors. If you’re buying a new property, look at the historical growth of properties in the area, local employment drivers and the proximity of the property to local services and facilities. Also ask your Real Estate Agent for a rental appraisal of the property. Most importantly, ask a Quantity Surveyor to provide an estimate of what depreciation deductions will become available once you have purchased the property and it becomes income producing. If you already own an investment property, if you haven’t already done so request a tax depreciation schedule from a Quantity Surveyor so you can claim the maximum deductions available as part of your annual tax assessment. If you’re planning on renovating, also make sure to get a schedule before and after you complete the renovations so you can claim the remaining depreciable value of any removed assets as a write-off in the year the assets are removed.

The post Four tried and true ways property investors make their money appeared first on .