» Property Investment

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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5 Tips for Renting to Friends and Family

BMT team — Mon, 10 Jul 2023 06:47:11 +0000

Renting to friends and family can seem like an appealing option due to the familiarity and trust involved, but it also comes with its own set of considerations and potential challenges. When considering renting a property to friends and family, there are several important aspects that investors should be mindful of. BMT outlines what investors should know and examine a scenario that delves into the tax implications of renting an investment property to a family member. Tip 1. Get a rental agreement and remain professional When renting to friends and family, it’s important to politely maintain objectivity and professionalism throughout the process. This mindset will help you set clear expectations, establish boundaries, and handle any issues that may arise fairly and impartially. Separating personal relationships from the business aspect will contribute to a healthier and more successful rental experience. Tip 2. Seek professional advice and management It may be tempting to manage the property and tenant yourself instead of seeking professional advice and help. Not only does this make it difficult and uncomfortable to raise the rent and organise inspections and repairs, but it has the potential to create a disgruntled personal and professional relationship. While it’s tempting, it’s best to seek professional advice and the help of a property professional, even more so when renting to friends and family. Property professionals hold the capacity to remain impartial while upholding the rental agreement for both parties. Investors should seek advice and help from property professionals including property managers, accountants and financial advisors to ensure the best investment outcome. Tip 3. Understand how rent can impact depreciation eligibility and other tax deductions It’s common for investors to want to charge their friends and family a discounted rate, but this can be financially damaging once tax time comes around. Investment properties generate thousands of dollars in deductions for their owners such as depreciation, interest fees, council rates, insurance fees, legal fees and more. For full tax deductions to be available, properties need to be rented at market value. This means the rent charged for a property must match similar properties in the area for the owner to be eligible to claim full tax deductions. When renting to friends and family, property owners need to be aware of how their depreciation eligibility can be impacted. By significantly reducing or completely waiving the rent for your friend or family member, you restrict the deductions you can claim. Tip 4. Take advantage of partial year deductions Investors can claim deductions on a pro-rata basis for the period the property was genuinely available for rent or earning a market value rent. Partial year deductions allow investors who use their property for both private and investment purposes, this is especially useful for holiday houses and properties used to house friends and family. It’s common for individuals to provide housing for their elderly parents. One aspect to consider is the potential impact on an investor’s eligibility for depreciation and other tax deductions when renting to friends and family. Case study: Mia rents property to her mother, Joan Mia has purchased an investment property with the initial intention of accommodating her elderly mother, Joan, for six months until an aged care villa becomes accessible. Subsequently, Mia plans to rent out the property to a tenant. The property’s market value of rent is around $550 per week. During her occupancy, Joan pays rent of $300 rent. Once Joan transitions to the villa, Mia finds another tenant who pays the $550 full market value of rent. In this scenario, Mia’s eligibility to claim deductions is based on the proportion of rent paid by Joan in relation to the market value of rent. Since Joan paid 55 per cent of the market value, Mia can only claim 55 per cent of the deductions for the period when Joan occupied the property. However, when the second tenant, who paid the market value occupied the property, Mia was eligible to claim full deductions for that portion of the year. So, to summarise, during periods when an investment property is genuinely available for rent or rented out at market value, investors can claim full deductions. When an investment property is rented below market value, the deductions are limited. For periods when a property is privately occupied, either by the owner or without any charge, tax deductions are not available. Tip 5. Maximise claims with a depreciation schedule Regardless of whether an investment property is rented to friends and family, investors can maximise their deductions with a tax depreciation schedule. A tax depreciation schedule outlines the available tax deductions for depreciable assets within a property and how much an investor can claim per year. BMT finds residential property investors an average deduction of almost $10,000 in the first full financial year. A BMT Tax Depreciation schedule identifies all deductions available while maintaining full Australian Taxation Office rulings and regulations. To learn more about the deductions available when renting to friends and family and how it can impact depreciation eligibility, call BMT on 1300 728 726 or Request a Quote.

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The Block 2022 depreciation schedules

BMT team — Thu, 10 Nov 2022 00:58:15 +0000

The Block 2022 was like nothing audiences – or crew – have experienced before. From the charming location and impressive renovations to the jaw-dropping depreciation deductions and unexpected auction outcome, this season has been the most extraordinary yet. Generating a record-winning profit of $1,586,666.666, Omar and Oz have won The Block 2022 selling their property at auction for $5,666,666.666 to serial Block buyer Danny Wallis. Danny Wallis also purchased the following two properties sold on auction day including Tom and Sarah-Jane’s House 1 which sold for $4,100,000.99, generating a profit of only $20,000.99, and Rachel and Ryan’s House 2, which sold for $4,249,000.50 post-auction generating a profit of $169,000.50. The Block 2022 is located in picturesque Gisborne South within the Victorian Macedon Ranges. Only a forty-five-minute drive from Melbourne, Gisborne is known for its sprawling country homesteads, tree-lined streets, comfy cafés and restaurants with beautiful wineries and olive groves. The location hits this year’s theme of ‘tree change’ spot on. The teams were assigned with renovating their properties into homestead-style houses plus host Scott Cam renovated a house of his own. All houses contain five bedrooms, three bathrooms and spacious living and dining areas with luxurious butler’s pantries, walk-in wardrobes and mudrooms. For the first time, contestants were also tasked with planning the landscaping for more than 700 square meters. BMT Tax Depreciation was asked to estimate the depreciation deductions available on this season’s properties on The Block. Below we outline the deductions found and just how advantageous they could be for an investor buyer. Jaw-dropping numbers Because of the substantial renovations completed and brand-new assets installed the houses are brimming with depreciation deductions. The table below demonstrates the depreciation deductions BMT found on The Block 2022. Ankur and Sharon’s house (House 3) generated the highest deductions with a total of $5,840,166, more than $100,000 higher than house two in second place. The other houses don’t fall far behind with an average total of $5,292,597 in depreciation deductions and an average of $203,340 in the first full financial year. There was a total of $31,755,586 in depreciation deductions found across all six houses for the life of the properties. To break this down the total capital works deductions (Division 43) were calculated at $28,911,186 and the plant and equipment (Division 40) deductions totaled $2,844,400. The Block auction which was held on Saturday 5 November was no doubt discouraging for the other two teams, but this isn’t game over for properties that failed to sell on auction day. Nine will “continue to negotiate with interested buyers to sell these homes, which are still on the market”, Scott Cam revealed. These properties still have the potential to fetch well over the reserve. While the auction didn’t go according to expectations, The Block properties hold the greatest deductions than ever before making it an enticing purchase for investors. Bradley Beer, Chief Executive Officer of BMT, said that savvy investors will take these lucrative deductions into account when considering any Block purchases as these deductions have the potential to significantly improve an investor’s cash flow. The houses on The Block undergo extensive renovations including new flooring, new roofing, new shelving and cabinets, new kitchens and bathrooms and even new rooms constructed. These upgrades make for attractive deductions. The houses are essentially stripped down to their structural component and built back up. Substantial renovations boost an investor’s eligibility for depreciation deductions. With over thirty million dollars in depreciation deductions, the houses on The Block are a property investor’s goldmine. They’re filled with brand new assets, have strong tenant appeal, low to no maintenance (as they’re newly renovated) resulting in fewer annual expenses and offer significant depreciation benefits. The appliances on The Block alone generated strong deductions. For instance, Omar and Oz’s kitchen features $250,000 in top-end appliances. Even if the furniture and other assets are removed for future tenants, the fixtures and fittings alone such as light fittings, kitchen and laundry appliances, blinds and curtains and more hold profitable deductions. Claiming depreciation is an essential step to not only optimising cash flow but also building and maintaining a successful property portfolio. This applies to all types of property investors. With over twenty years’ experience BMT Tax Depreciation are the industry’s leading experts in property depreciation. To learn more about the depreciation available in substantially renovated properties or depreciation in general contact BMT 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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Property Market Update 2022

BMT team — Fri, 28 Jan 2022 02:16:37 +0000

The pandemic pushed Australians to their limits in 2021, but we remained staunch – as did the housing and property market. Read on for a recap of events in last year’s property market and watch the video to hear the thoughts of our CEO, Bradley Beer. Contents: National property market prices Rental yields Finance and interest rates National property market prices The property market in Australia finished the year with strength. At the end of December 2021, Australian dwelling values were 22.1% higher than in December 2020, coming off a cyclical high of 22.2% in the twelve months to November. Australia’s inflated property market is now valued at more than $9 trillion, a record high after surging home prices through the pandemic lifted the value of residential property by $1 trillion in the past six months alone. Rental yields With national property values recording an annual rise of 22.1% compared with a 9.4% rise in rents, rental yields have decreased as a natural consequence. Gross rental yields fell to a new record low across Australia, reaching 3.2% in December. The lowest yields, by some margin, remain in Sydney (2.4%) and Melbourne (2.7%), however, except for Perth and Darwin, every capital city is recording record low yields. Finance and interest rates Following its December meeting, the RBA kept the Official Cash Rate at the record-low of 0.1 per cent. Concerns about property affordability have risen to the highest-ever level in the latest ANZ/Property Council Survey, with respondents saying soaring prices and increasingly unequal access to home ownership make it the number one issue for governments to address. The powerful Reserve Bank-led Council of Financial Regulators has maintained its watching brief over the hottest property market in over three decades, saying it continues to “closely monitor” the impact of the higher interest rate buffers imposed in November. Hear more from our CEO, Bradley Beer.

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What you need to know when buying a commercial property with existing tenants

BMT team — Thu, 11 Feb 2021 03:47:05 +0000

With long leases, the opportunity for high returns and lucrative tax deductions on offer, commercial properties can be a sound investment choice. Each property is unique, as will be any pre-existing leasing situation you enter once you purchase the property. So what do you need to know about buying a commercial property with existing tenants? In this article, we will cover: What to ask yourself when making the decision to buy What to consider when buying a commercial property with existing tenants What happens and how does it work? Claiming depreciation with or without existing tenants Making the decision to buy a commercial property Before we get into the details of what happens if the commercial property you buy has pre-existing tenants, there are several key questions to ask yourself. 1. Is it the right choice for your investment strategy? Your investment strategy fundamentally underpins your choice. Commercial properties are unique, subject to different legislative requirements and standards compared to residential, while attracting a niche tenant market. Commercial properties generally provide a higher rental yield compared to residential, but this comes with a risk as looking for a niche tenant can cause the property to sit vacant for a period of time. If this is what you’re looking for, commercial investment could be a good move. 2. Is this a viable industry to enter? Supply and demand aren’t the only factors to consider when purchasing a commercial property. The type of industry the property can be used for also feeds into the equation for example farming, manufacturing, hospitality and traveller accommodation. The industry plays an important role in determining the type of rental rate you can expect and the feasibility of attracting tenants. 3. What’s your budget? Depending on industry, property type and location, commercial investments can create a substantial initial financial outlay. While the long-term returns and consistent rental income can help with ongoing costs, ensuring the property is within your budget to begin with is crucial. It is worth talking to a financial institution early. There are often additional requirements for commercial finance and reduced allowable LVR’s (loan value ratio) which means a higher deposit is often required compared to residential loans. What to consider when buying a commercial property with existing tenants The first step is to understand what you need the commercial property for. If you’re simply wanting to lease it to tenants at the market rate, then having existing tenants can be beneficial, it means you’re making a return straight away and a long lease is a positive. However, there are situations where having an existing tenant isn’t ideal. For example, if you’re wanting to occupy the property yourself to operate your own business. Or if the current tenant is on a prehistoric lease where the rental rate isn’t competitive in the current market. This is where buying a commercial property with an existing tenant can be less than ideal. Essentially, purchasing a commercial property doesn’t allow you to dishonour a pre-existing, fixed lease. The best option here is to seek legal advice prior to entering the contract of sale to understand the lease’s terms and any other contractual agreements. Understanding the fine print in the leasing contract is crucial as this will determine what you can and can’t do with the property once you own it. The story changes if the tenant is on a periodic arrangement. This can provide more flexibility, allow you to make adjustments or end the leasing agreement following the set notice period. It’s important to note that this doesn’t simply mean you can do as you wish and it’s just as important to seek professional legal advice. What happens if the tenant leaves and doesn’t remove fit-out? In some instances, the tenant isn’t required to remove their fit-out at the end of their lease. If this happens to you, it can work in your favour. Section 40-40 of Subdivision 40-B of the Income Tax Assessment Act 1997 indicates that if there is value in the assets left behind, the new owner of the property (you) becomes the owner of the assets. Claiming maximum depreciation when buying a commercial property Even if the previous owner had a tax depreciation schedule, it’s crucial to get your own. This is especially true if you need to do some work to the property as a process called scrapping allows you to instantly claim the un-deducted value of removed assets. Several further factors also affect how much an individual investor can claim in depreciation including the settlement date, the industry the commercial property operates in under the new ownership and much more. BMT Tax Depreciation can provide an obligation-free depreciation estimate in the early stages of buying a commercial property with existing tenants. This can help with your decision-making process and give you a better idea of the type of cash flow you can expect. To find out more about BMT’s commercial schedules and their other commercial services, call the team on 1300 728 726 or Request a Quote.

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Is stamp duty a tax-deductible expense for property investors

BMT team — Mon, 20 Jan 2020 00:41:44 +0000

Stamp duty for property transfers is a large expense, and property investors often ask if it is tax deductible. Unfortunately for property investors, you can’t claim a deduction for stamp duty straight away. However, it can reduce the capital gains tax liability when you sell the property. Key points: Stamp duty is a form of tax charged by State and Territory Governments Stamp duty is a capital cost and isn’t immediately tax deductible When selling an investment stamp duty can decrease your capital gains tax (CGT) liability through increasing the property cost base. Contents What is stamp duty? Is stamp duty tax deductible? What does it mean for property investors? What is stamp duty? Stamp duty, also known as transfer duty, is a form of tax that State and Territory Governments charge for certain documents and transactions, including the transfer of a property. Each state and territory have different stamp duty calculation methods. Therefore, the amount of stamp duty charged for a property sold in Victoria may be different for a similarly priced property in New South Wales. The timeframe of when stamp duty is payable also varies across states and territories. Is stamp duty tax deductible? Capital costs associated with acquiring a property, such as stamp duty, can only be used to offset capital gains. The exemption is when an investment property is acquired in a Territory under a crown lease. Stamp duty and costs to incur the crown lease are immediately tax deductible. Capital costs may also include legal fees, conveyancing and pest inspection fees incurred when acquiring the property. As a property investor, it’s important to understand what your capital costs are and how they form a part of your property cost base. Your property cost base and CGT The good news for property investors is that as stamp duty forms a part of your cost base, it can reduce the CGT liability when you sell the property. Your ‘main residence’ (your home), as defined by the Australian Taxation Office, is generally exempt from CGT. Fundamentally, CGT is a tax you pay on the profit made from the sale of a property. CGT is a complex topic for property investors and many factors come into play when paying CGT on the sale of your investment property such as discounts, depreciation and exemptions. The basic formula for calculating CGT is as follows: (Selling price – transaction costs) – (original purchase price + associated transaction costs) = capital gain (or loss) The amount paid in stamp duty positively affects the CGT formula for the investor by increasing the cost base value as a capital cost. What does this mean for property investors? As a property investor, stamp duty can work favourably for you in the long term. When you decide to sell your investment property, stamp duty forms a part of the cost base and can reduce the amount of CGT payable. It’s important to understand how your investment circumstances, capital costs and depreciation claims impact CGT liabilities to help best guide your investment strategy. For more information on available tax deductions and capital costs, visit our website at bmtqs.com.au or contact our specialist team on 1300 728 726. Related articles: When do you pay capital gains tax on investment property? Does depreciation affect capital gains tax?

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Steps to expand your property portfolio

BMT team — Thu, 12 Sep 2019 01:25:22 +0000

Deciding to invest in property is one of the most significant decisions a person can make. Once on the property ladder, it can be argued that it’s just as important to consider when, where and how to expand your property portfolio to avoid risk and broaden the opportunity for success. If you’re considering this, below are some simple steps to be aware of. Do your research on the property market Whether you’re looking to buy your first investment property or expand your portfolio, it’s important to do your research. Consider economic factors and capital growth potential in up-and-coming areas with lower entry costs and forecasting high growth. Look at Development Applications (DAs) to determine any roads and infrastructure projects including new schools, commercial developments, parks and any Council re-zoning submissions as these are likely to attract renters to the area. BMT Tax Depreciation’s online portal MyBMT has a handy ‘Research and insights’ tool allowing you to view planning applications in suburbs where you may want to invest. It’s important to also consider locations with a range of public transport options, nearby employment opportunities for tenants and assess rental yields and vacancy rates. Awareness of these factors can help determine future property income potential to cover expenses involved in purchasing and holding the property. Explore additional factors that may influence your buying decision including your budget, return on investment expectations, type of loan you qualify for and depreciation deductions you may be entitled to. Within MyBMT, take advantage of PropCalc which can help you calculate the cash flow of owning any property. In its projection of future potential cash flow, PropCalc will consider potential depreciation deductions once a property is income producing to help you make an informed decision. Determine your acceptable risk What level of risk are you willing to accept? All property investment comes with financial risk and knowing your limits can go a long way towards alleviating potential stress and ensuring you don’t over-extend your financial obligations. Consider potential changes in economic factors, including interest rates, or any repairs and maintenance that may be required on the property. This will ensure you aren’t leaving yourself without a buffer if unforeseen circumstances emerge. Choose diverse locations and property options If you’re an investor wanting to minimise risk, consider diversifying your property portfolio to expand your reach and spread the financial risks across a broader range of assets. During FY 2018/19, BMT found 74 per cent of investors purchased an investment property within metropolitan areas/capital cities compared to 26 per cent who own regional investment properties. BMT found most investors prefer to stay within their comfort zone, with 92 per cent of those living in metropolitan areas also purchasing an investment property locally, compared to 8 per cent who invested in regional areas. In contrast, regional investors are more likely to invest further afield, with 64 per cent of those living in regional areas purchasing an investment property elsewhere, as 36 per cent then invested in metropolitan areas. One way investors can diversify is by selecting properties in several locations. For example, you might already own a property in Perth where property values fell by -2.1 per cent in the three months to June 2019 according to CoreLogic. If your only property was in Perth and you sold it during this time, you’re likely to have made a loss. However, by investing in other locations that are performing better and achieving capital growth, you can create a financial buffer and reduce your risk. Alternatively, another way to diversify is to consider broadening the types of properties you invest in. Most property investors tend to focus on residential rental properties, however commercial properties are also worth considering as they offer a number of benefits, as explained in our article ‘Why you should invest in commercial property’. Investors owning both residential and commercial properties minimise their risk of a single economic factor or downturn in one area of the property market affecting their entire portfolio. However, some consider commercial properties to carry greater risk due to fluctuating economic factors and possible lengthy vacancy rates between tenancies. Consult a specialist Quantity Surveyor when expanding your property portfolio Once a purchase has been made and you’ve exchanged contracts on a second property, consult a specialist Quantity Surveyor to obtain a comprehensive tax depreciation schedule for the property. BMT staff can assist you over the phone or alternatively you can request a new schedule at bmtqs.com.au or via online portal MyBMT. This online portal makes managing all your property investment and depreciation needs for multiple properties easy as all information is contained within the one handy location. Register for MyBMT today or alternatively Request a Quote online or speak with one of our expert team on 1300 728 726.

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Using equity to buy a second property

BMT team — Thu, 21 Mar 2019 04:06:09 +0000

Are you a home owner looking to buy an investment property? You may be able to use the equity in your home as a deposit to buy the property, without using your own cash. In this article we will explore: What is equity? Do your research Renovations Reduce debt Get your property revalued The benefits of equity – more properties What is equity? Equity is the portion of a property that you truly ‘own’. It’s the difference between the market value and the amount you still owe on it. For example, if your property was valued at $600,000 and you have debts of $400,000 then you would have $200,000 in equity. Here are five ways you can begin to build more equity. 1. Do your research Equity can build when the market value of your property increases. Before you buy any property, whether a home or an investment property, do your due diligence and favour an up-and-coming area likely to grow in popularity. It’s also important to consider whether the location of the property is close to amenities like public transport, schools and shopping centres, as this will affect property values. BMT Tax Depreciation has developed an online portal, MyBMT, which helps property buyers make informed decisions. The new research and insights tab helps you to learn more about the area in which a property is located, to discover newly listed properties in the area and see important metrics such as recent census data. This information can assist the decision of whether to buy a property. The research and insights tab also informs you of any lodged planning applications and new developments in the area so there are no surprises after purchase that could decrease the property’s value. 2. Renovations Making upgrades and renovations can boost the market value of your home, but it’s important to avoid overcapitalising. Updating kitchens and bathrooms, improving landscaping and making the home more energy-efficient can all pay off. However, those projects cost money up front and you need to be confident that you can recoup the costs. If you’re making improvements mainly to build equity, pick projects with the highest return on investment. Read about how a renovation achieved a 13 per cent yield here. Get a feel for how much your proposed renovation will cost by collecting quotes and speaking to others in your area who have recently renovated. It’s also important to be consistent with the property’s upkeep. Routine maintenance is tedious and costs money, but a home that’s falling apart is not appealing. If you fail to address maintenance issues like leaks and deteriorating roofing, your home equity may begin to decrease over time. Keep in mind that any renovations which are completed to investment properties should increase your depreciation claim for eligible items, which in turn will reduce your tax bill. You may also be eligible to ‘scrap’ any assets you’ve removed during renovations. For a free estimate of the likely depreciation deductions you could be claiming from your investment property renovation, contact the expert team at BMT. 3. Reduce debt By lowering your mortgage you are effectively increasing your equity in that property. Even if you have a thirty-year mortgage, you can speed things up by paying extra. Each additional dollar you pay above your required monthly payment reduces your debt and can add to your equity. If you are making mortgage repayments on a monthly basis, consider changing your repayments to fortnightly. Generally, the more often you’re paying funds onto your loan, the less interest you will pay overall. This is because the loan balance is constantly reducing. 4. Get your property revalued Getting your property revalued when markets are high can give you more equity. If your property has gone up in value, it’s worth getting your property revalued because you could use that extra equity to reinvest. 5. The benefits of equity – more properties Equity makes it possible for property investors to refinance a loan and access funds to use as a deposit to buy other properties. The more properties you have, the more equity you could potentially build, as the value of the properties goes up and the tenants pay off your loans. You might also enjoy: Steps to expand your property portfolio When do you pay capital gains tax on investment property? How to become a property investor while earning less than $80k per year

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Student accommodation investment trends

BMT team — Thu, 28 Feb 2019 22:14:54 +0000

When you purchase a property and rent it out to university students, you can often get a higher-than-average rental yield for the area. According to the Knight Frank 2018 Australian Student Accommodation Insight Report, a number of property investors have already entered the student accommodation market and are successfully building portfolios. The report shows student numbers are rising in Australia. International students in particular are having a direct positive impact on national and state economics. For those considering a student accommodation investment, we’ve looked at the benefits and risks associated. In this article we will look at: Numerous leases result in greater rental returns Multiple leases could result in higher property management fees and periods of vacancy Entry prices for student accommodation can be more affordable Ensure you are adequately covered for damage Increase your cash flow at tax time by claiming depreciation Numerous leases result in greater rental returns It can be confusing dealing with numerous leases for the one property at the same time, but the higher economic return for student accommodation often makes the extra work well worth it. The Frank Knight Report shows student rental properties net between six and eight per cent for inner-city residential property close to educational institutions. By organising multiple independent leases of unrelated tenants, you could receive a significantly higher rental return. For example, a student rental property could accommodate five tenants in a building which would normally house one family on a single lease. Another advantage of having multiple income streams from more than one lease is if one tenant leaves, there are others still paying rent. Multiple leases could result in higher property management fees and periods of vacancy While rental yields are much higher for student accommodation, it’s important to be aware property management fees could increase. For student accommodation, these fees sometimes reach up to 10 per cent of the total rent. There’s also the stress of possibly having no tenants in the property when summer holidays start. It’s worth considering having fixed-term leases in place, so if students want to leave during a particular period, like at the end of the school year, they understand they still have a lease and they will be required to continue paying rent. Lease terms are typically aligned with the major intake periods, which are January to February and June to July. Entry prices for student accommodation can be more affordable A student accommodation investment can also provide a low entry-priced property in CBDs and metropolitan areas. Rents per square metre are very rewarding and there is an increasing trend towards self-contained living, with studio or one bedroom apartments. Unilodge, an Australian student accommodation placement organisation, says while most investors think being close to a university is a must – this isn’t necessarily the case. Generally, students who live in suburbs further out are later in their degree, earning more money, with a bit more understanding about their environment. Unilodge suggests shared accommodation arrangements, with one or more ensuites, are a big plus for investors. Smaller households, affordability and a diversity of housing choice are also in high demand. Recent research conducted by Unilodge advises the greatest occupancy demand is predominately in the $170 to $225 per week per room range, with the past twelve months the average rental arrears was less than two per cent. Ensure you are adequately covered for damage The trickiest problem for landlords who own a student accommodation investment property is an increased likelihood for damage to occur. It is important to ensure you have adequate home and contents insurance and to know who to pass costs onto. With common areas, it can be difficult to work out who is at fault, making it harder to work out which policy the damage applies to. For this reason, most landlords have the same insurer for home and contents insurance BMT Insurance and lodge the claim against the house. Increase your cash flow at tax time by claiming depreciation According to the Student Accommodation Association, students want to be able to move straight into properties without having to buy anything. They expect security screens, locks on bedrooms doors and internet access in all rooms. Preferably rooms should be fully furnished, with a desk, chair, bed, lamp, bin, drawers and hanging space. This may cost more to start with, but fully furnished accommodation has plenty of benefits around tax time. There may be more favourable depreciation deductions for owners of student accommodation properties at tax time than a normal rented property. Before buying a student accommodation investment property, contact the expert team at BMT Tax Depreciation on 1300 728 726 to help you make an informed decision about the most suitable property for you investment and to discover what deductions you can claim.

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