» residential 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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ATO reveals the biggest tax deductions for investment property owners

BMT team — Fri, 12 May 2023 05:50:55 +0000

The Australian Taxation Office (ATO) releases rental property taxation statistics each year. These statistics reveal the type and size of the tax deductions that property investors claim. From the most recent ATO data, we have compiled a list of the biggest tax deductions residential property investors claimed in the 2019/20 financial year. 1 – Interest The biggest tax deduction Australian property investors are claiming is interest on their investment loans, with $21,068,254,068 claimed in FY 2019/20. Investors can only claim interest for any period the property is genuinely available for rent and can’t claim when the property is used for private purposes or for the principal portion of the loan. 2 – Capital works depreciation Capital works deductions (Division 43) also known as building depreciation takes second place with property investors claiming $4,138,567,853 in FY 2019/20, an increase of over $153 million from the year prior. Capital works deductions are claimable for the wear and tear that occurs to a building’s structure and items considered to be permanently fixed to the property. Capital works deductions are generally claimed at a rate of 2.5 per cent per year. 3 – Council rates Council rates are calculated based on a property’s land value and can be deducted in the year they incur. $3,827,281,335 was claimed in council rates in FY2019/20. The payment of council rates covers over 100 services including the maintenance of local roads, council facilities and open public spaces such as parks and gardens. 4 – Property agent fees/commission The cost of hiring a property agent is fully tax-deductible, including the expenses associated with calling and emailing them. $3,085,509,622 was claimed in property agent fees. 5 – Body corporate fees Body corporate fees are costs incurred to maintain, manage, and control the common property on behalf of owners. Body corporate fees contribute toward the payment of things such as building insurance, maintenance of common areas and amenities, contracted on-staff, utility bills of common areas, management fees and works and repairs to the building. Body corporate fees can be immediately deducted in the year the cost is incurred, unless it is a special levy for a capital expense which must be claimed over several years under capital works. $2,869,399,392 was claimed in body corporate fees in FY2019/20. 6 – Repairs and maintenance Repairs are works made to repair damage or deterioration of a property, whereas maintenance is work completed to prevent damage or deterioration of an asset. These costs can typically be claimed as an immediate tax deduction in the year they are incurred. $2,839,134,344 was claimed in repairs and maintenance in FY2019/20. 7 – Plant and equipment depreciation $2,647,136,205 was claimed in plant and equipment depreciation (Division 40) in FY2019/20. Plant and equipment assets are items which are easily removable or mechanical in nature like hot water systems, carpets and smoke alarms for example. Investment property owners can claim depreciation for the wear and tear of these assets at a rate dependent on the investor’s elected depreciation method. Even though the legislation changes in 2017 prevented owners of second-hand residential properties from claiming deductions for previously used plant and equipment assets, this proves that there are still lucrative deductions available in this division. Owners can still claim deductions for brand-new properties and assets they installed themselves. 8 – Water charges Depending on the state, some landlords are required to pay all water supply service charges and sewerage supply service charges. While water charges are generally the responsibility of the tenant, in some states water isn’t allowed to be disconnected between tenants. In those scenarios, property owners are eligible to claim deductions for water charges during vacant periods, as long the property is genuinely available for rent. $1,793,013,752 was claimed in water charges in FY 2019/20. 9 – Insurance $1,779,337,169 was claimed in insurance fees in FY 2019/20. Property investors can claim insurance as a tax deduction, covers include landlord insurance, building insurance, contents insurance, or combined building and contents insurance. 10 – Land tax $1,529,183,161 was claimed in land tax in FY2019/20. Land tax liabilities are calculated differently in each state and are deductible in the respective income year to which the liability relates. 11 – Sundry rental expenses Sundry rental expenses are small, rare or insignificant expenses that don’t fit into other categories. $1,126,510,953 was claimed in sundry rental expenses in FY 2019/20. 12 – Cleaning expenses $306,352,293 was claimed in cleaning expenses in FY2019/20. As long as the property is genuinely available for rent, cleaning expenses are fully tax-deductible in the year they occur. 13 – Gardening/lawn mowing expenses In an apartment, unit or townhouse dwelling, it’s typically the landlord’s responsibility to maintain the lawn and any gardens as these areas are shared between tenants. Some single-dwelling leases stipulate the landlord will maintain the landscape, they may do it themselves or hire a professional service to do it. This also includes maintaining the property during vacant periods. Any equipment used exclusively for maintaining the landscape within an investment or costs associated with hiring a professional is fully tax deductible. $233,185,931 was claimed in lawn mowing and gardening expenses in FY 2019/20. 14 – Borrowing expenses Borrowing expenses include the costs involved in purchasing a property, such as loan establishment fees, lenders’ mortgage insurance, stamp duty charged on the mortgage, title search fees, costs for preparing and filing mortgage documents, mortgage broker fees and valuation fees. Borrowing expenses less than $100 can be fully deducted in the year they incur. Borrowing expenses over $100 are spread over five years or the term of the loan, whichever is less. $205,038,974 was claimed in borrowing expenses in FY 2019/20. 15 – Advertising for tenants $129,808,789 was claimed in advertising costs in FY2019/20. Advertising a rental property can be costly once photography, ‘For Lease’ signboards and online and print listings are complete. Fortunately, these expenses are fully tax deductible. In some scenarios, a real estate or property manager will include these costs in their fees. 16 – Pest control fees $77,726,097 was claimed in […]

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9 tax depreciation facts every investor needs to know

BMT team — Thu, 14 Apr 2022 00:28:49 +0000

BMT Tax Depreciation has prepared over 700,000 schedules and found clients an average of $9,000 in the first full financial year deductions. However, BMT’s research shows that up to 80 per cent of property investors still fail to take full advantage of claiming tax depreciation. When it comes to managing a property portfolio and claiming all the right deductions there is an overwhelming amount of information. So, we thought we’d break down 9 tax depreciation facts. Fact 1. Tax depreciation is the highest non-cash deduction Fact 2. Two types of property depreciation deductions Fact 3. Legislation changes don’t affect capital works claims Fact 4. Legislation changes don’t affect substantially renovated property Fact 5. The immediate deduction boosts cash flow Fact 6. New and old properties hold depreciation Fact 7. Low-value pooling accelerates depreciation Fact 8. Hidden deductions are found in common property Fact 9. Site inspections are a key to step to maximising compliant claims Fact 1. Tax depreciation is the highest non-cash deduction Tax depreciation is a non-cash deduction, meaning investors don’t need to spend any money in order to claim it. Overall, property depreciation is the second-highest deduction available for property investors. Tax depreciation comes second only to costly mortgage interest repayments. Fact 2. Two types of property depreciation deductions There are two types of depreciation deductions available to claim. The first type is capital works (Division 43). This is the building’s structure and the assets that are permanently fixed to the property. These assets can include garages, fences, and built-in kitchen cupboards. On average, capital works deductions make up 85 to 90 per cent of the total depreciation claim. The second type of depreciation is plant and equipment (Division 40). These assets are easily removable from the property or are mechanical in nature. This can include blinds and curtains, light fittings and security systems. While these typically are less than capital works, they still hold significant deductions. Due to legislative changes, there have been adjustments to how plant and equipment deductions can be claimed on second-hand properties, further explained below. Fact 3. Legislation changes don’t affect capital works claims In 2017 the Australian Government made changes to depreciation legislation. The changes meant that owners of second-hand properties purchased after 9 May 2017 could no longer claim depreciation on previously used plant and equipment assets. Investors could still claim plant and equipment deductions on new assets purchased for the property. It’s important to note the legislation changes don’t impact eligibility to claim depreciation deductions for qualifying capital works. Fact 4. Legislation changes don’t affect substantially renovated property A property is considered substantially renovated when all, or substantially all of a building is removed or replaced. Some key examples of substantial renovations include replacing foundations of the building, walls, floors, roof or staircases. If an investor purchases a second-hand property directly after its substantial renovation, the 2017 legislation changes do not apply. This means the new owner is eligible to claim on all new plant and equipment assets and the capital works. Fact 5. The immediate deduction boosts cash flow Investors can further boost their cash flow by claiming the immediate deduction on eligible assets valued up to $300. This immediate deduction can be claimed in the year of purchase and there’s no limit to the amount of assets that can be claimed. This means that if they are eligible, the investor can potentially boost their cash flow by hundreds if not thousands of dollars. Fact 6. New and old properties hold depreciation There is a common misconception that older properties cannot hold depreciation deductions, which is false. Deductions can be found in most properties, from brand new properties to properties built over twenty years ago. Unfortunately, many investors rule out claiming depreciation as they believe their property is too old. An obligation-free tax depreciation estimate from BMT can provide the answer. BMT also guarantees to find double their fee in deductions in the first full financial year or they won’t charge for their services. Fact 7. Low-value pooling accelerates depreciation Low-value assets that aren’t eligible for the immediate deduction are often placed in the low-value pool. Low-value pooling allows owners to claim depreciation at an accelerated rate. When a plant and equipment item is allocated to the low-value pool, it can be depreciated at a rate of 18.75 per cent in the first year and 37.5 per cent each following year. An item can only be included in the low-value pool if it is a low-cost or low-value asset. Low-cost asset: opening value of $1,000 or more. Low-value asset: a written down value of $1,000 or more. When an asset’s opening value was more than $1,000 but the residual value is now less than $1,000. Fact 8. Hidden deductions are found in common property When an investor purchases a property such as an apartment or townhouse in a complex, it will often be under a strata title. Owners of these properties can claim an apportioned deduction of the common property assets under the strata. These may include elevators, intercom systems and ventilation fans. BMT’s specialist site inspectors determine the value of these assets for depreciation purposes by defining the owner’s interest in the asset. Due to depreciation only being available for a portion of the asset, it may fall into the low-value pool or will qualify for an immediate deduction. Fact 9. Site inspections are a key to step to maximising compliant claims Both the National Tax and Accountants’ Association (NTAA) and the Australian Institute of Quantity Surveyors (AIQS) recognise that physical site inspections are essential for claiming maximum deductions compliantly. Failing to conduct site inspections often results in missed deductions or errors made on the tax depreciation schedule. BMT’s specialist site inspectors conduct physical site inspections, ensuring an accurate tax depreciation schedule is completed that maximises deductions and is ATO compliant. For over twenty years, BMT Tax Depreciation has been the most trusted specialist in the industry nationwide. To learn more about how you can start […]

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Best ways to advertise a rental property

BMT team — Wed, 16 Feb 2022 05:18:26 +0000

There are many reasons why you might need to advertise a rental property. Maybe the investment property is being advertised for the first time. Perhaps an existing tenant doesn’t want to renew the lease or has handed in a notice to terminate. Whatever the circumstances, your property professional will be able to walk you through the best advertising options available to you. When listing a property it’s best to have your ‘perfect’ tenant in mind. This will help your property professional work out how to reach them effectively to minimise the period of lost rental income. Here are some of the best ways to advertise a rental property in today’s market. Online listing portals Social media Newspapers Signs and flyers Online listing portals When Australians are looking to find a rental property, they generally head online. Online portals like Domain and realestate.com.au have a substantial audience reach, with millions of users accessing these portals nationwide. Your property professional will be able to guide you as to which listing portal is more common in your area and will reach a more suitable audience. Example, Allhomes is more common in the ACT than other sites. These portals are easy to understand and navigate. Social media Advertising rental properties on social media platforms like Facebook, is becoming more common. With the opportunity to use both free and paid advertising, social media can be cost effective. While it’s not necessary to use paid ads, there are many benefits to doing so. These include micro-targeting for specific audiences, reports and analytics, ad forecasting, performance estimates and more. For instance, your ‘perfect’ tenant is easier to target than ever with Facebook’s audience targeting software. Using filters that target specific demographics like age, location, interests and even online behaviours can track and target potential tenants to receive your rental property advertisements. If paid ads are not an option, posting rental properties on real estate agency or personal pages can still be an effective advertising option, reaching a targeted audience with key word and filtered searches. The Facebook Marketplace page is also an alternative. Newspapers Newspapers are another effective way to advertise rental properties. Online newspaper ads can include links to other websites with directory to further information and photos. This could be a real estate agency website or the original property listing. It is good to keep in mind that online newspapers generally have a younger average reader whereas printed newspapers generally reach an older audience. If advertising in a printed newspaper, listing rental properties on Saturdays and Sundays may be more effective as people read newspapers more often on weekends. These advertising slots may be more expensive than weekdays but will likely reach a larger audience. Signs and flyers Signage and flyers can be an effective way to advertise and generate interest for an investment property in surrounding streets and suburbs. They are an inexpensive way to broadcast in specific locations, providing receivers with property and contact information. This may be important if seeking a specific type of tenant or advertising in areas with similar community engagement or services. Hire flyer delivery services are available in most main cities in Australia for a relatively cheap price, with some packages starting at $130 per thousand flyers. It’s important to remember that rental advertising costs can be claimed at tax time. The advertising expenses can be claimed in the same year that they were incurred, reducing an investor’s taxable income and improving their cash flow. A vacant investment property can also present an opportunity for improvements to be made to the property, since tax deductible expenses can be claimed as long as it is genuinely available for rent. If planning to make improvements to an investment property, it’s best to reach out to a tax depreciation specialist like BMT. A BMT Tax Depreciation Schedule outlines every depreciation deduction claimable from the rental property. To learn more about depreciation contact BMT today on 1300 728 726 or Request a Quote.

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Are you looking to invest in property or shares? We’re here to help weigh up the pros and cons

BMT team — Thu, 30 Sep 2021 06:01:15 +0000

Property and shares are two popular choices when it comes to starting an investment journey. Each have their unique pros and cons and much needs to be considered before making a decision. When someone invests in property, they purchase it for the purpose of producing income (i.e. renting it out). You can invest in all types of property across the residential and commercial markets. While investing in shares involves purchasing a share (also known as ‘stock’) in a publicly listed company on a stock exchange, such as the ASX. Investors make money from shares through capital growth (selling the share once its value rises) and dividends. What’s a better investment choice? It’s important to consider the pros and cons of each. There is no straight forward answer to this question. Instead, it’s important to consider the pros and cons of each and how they align to your own investment goals. We recommend you speak to a financial adviser before you make any investment decisions. Property investment pros and cons Pros Capital gain Property historically grows in value over time even in the hardest of economic times. Currently economists from the major banks in Australia are predicting that Australian housing values will show annual growth by 18.5 per cent by the end of 2021. There are two key benefits of owning a property with capital growth. Firstly, it helps you build your equity which can help you reinvest. The second (and more obvious) way is selling the property at a profit. Reliable cash flow Attracting quality tenants to the property means you will have a reliable cash flow almost guaranteed for the lease term. The rental rate usually stays the same throughout a lease agreement which means you know how much money to expect and when. Increased tax deductions A key benefit of investing in property is the tax deductions that are unlocked. Essentially, most ownership costs associated with the property will become tax deductible. Examples are interest repayments, insurances, land taxes and real estate fees. This is all in addition to lucrative depreciation deductions that may be available. Unlike other deductions these can be claimed without an out-of-pocket expense which is why depreciation is often referred to as a non-cash deduction. The rental income from an investment property is offset by these tax deductions and any subsequent loss is further applied to reduce your overall taxable income, including your salary. Which means in this overall circumstance, you would pay less tax, saving you money. Cons Expensive Getting a step on the property ladder itself is expensive. Not only do you need the deposit at a minimum, but you also need to cover additional upfront costs. These can include stamp duty, conveyancing fees, lenders mortgage insurance if required and inspection costs. The upfront capital that is needed to get into the property market is the biggest roadblock for anyone, whether an investor or an owner-occupier. Understanding this when looking into your investment options is crucial. Tenant-related risk Like any investment, property has its risks. The most common one is those that are tenant-related. Even the most comprehensive tenant search can’t guarantee that accidents won’t happen. While a bond and landlord insurance can mitigate the risks, it doesn’t necessarily mean you’re covered for everything. Liquidity Selling an investment property is a long process. Even in a hot property market, the process from obtaining a property valuation to settlement can stretch out for months. This means that the liquidity of an asset like property is very low, it can’t just be converted into cash instantly and many variables impact how this occurs. Shares investment pros and cons Pros Ease of entry You can start investing in shares for as little as $50 through providers like Commsec pocket. While the bigger the investment, the bigger the risk and potential return, having the option to start off small can be a positive way to get started in the share market. For example, you can invest in what is called Exchange Traded Funds (ETF). An ETF is a passive, low-cost form of a managed fund which looks to gain exposure to specific areas through diversification across multiple shares or assets in that area to lower risk. ETFs are available for a wide range of tradable asset classes including Australian shares, foreign currencies and bonds. Capital gain A smart share investment choice can result in a big capital gain with little work. When you purchase a share at a lower price, hold onto it for a period of time and then trade it (sell) back on the share market at a higher price, you make a capital gain. However, a lot of patience can be required when making a significant capital gain on a share. Diversification You can become a shareholder in diverse range of listed companies. From tech stocks, the banking sector to health and retail players. Share portfolio diversification allows you to minimise risk and spread your investment across a number of profitable sectors. Liquidity Unlike property, shares have the added benefit of having high liquidity. This is because they can be sold very easily any day that the share market is open. This doesn’t guarantee that they can be sold at a higher price than what they were purchased for, but they can still be turned back into cash easily. Cons Shareholder rollercoaster Share prices can change significantly within a short period. Prices can go up and down due to internal or external macroeconomic factors that are impacting the company you hold a share in. Prices can also fluctuate with no reason at all which can make the process of investing in shares very stressful. Making a loss When you sell an asset at a lower price than you purchased it for, you are making a capital loss. The share market can be turbulent and you may be caught in a situation where you need to offload shares at a price lower than their original purchase price. Lack of or no dividends […]

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I just bought an investment property… now what?

BMT team — Wed, 30 Jun 2021 01:56:55 +0000

So, you have just bought an investment property and ‘hot tips’ are coming from everywhere. Don’t get overwhelmed, start with the basics. Here are four fundamentals to help set you up for success. 1. Get the property rent-ready Getting a property ‘rent-ready’ means some repairs and maintenance may be needed to make sure the property is fit for tenants. This could include ensuring all smoke alarms meet government standards, checking for leaks in the property’s plumbing and reviewing the state of the property’s fittings and fixtures like floor coverings and guttering. Maintenance activities such as pest control, professional cleaning and yard maintenance may also be required. Look into your state or territory’s rental standards to ensure your property meets all legal requirements. You will be able to find those that are relevant to you on your state or territory’s government website. 2. Find a suitable property manager Your property manager is the go-to person that makes managing your investment property easy, so it goes without saying that finding a suitable one should be at the top of your priority list. Property managers do a lot of heavy lifting to ensure you find a reliable tenant that will treat your property like their own. Not only do they collect your rent, but they also manage inspections, tenant communication, maintenance or repair requests and help you through the process of any disputes that arise. Take the time to research local property managers. See what they specialise in and the extent of their experience. It’s always a good idea to meet your property manager in person and discuss your needs prior to signing any contacts. 3. Talk to your accountant An investment property provides a new income stream, and it’s important to manage this effectively. Your accountant will help you navigate this transition. They will help you budget, plan and manage your cash flow. They will explain your taxation reporting obligations. They will know the ins and outs of repairs versus maintenance and will also ensure you claim every tax deduction possible so your investment’s cash flow will reach its full potential, including depreciation. 4. Find out if depreciation is available Depreciation is the natural wear and tear of property and assets over time. As a property investor, you can claim this as a tax deduction. In further good news – it’s the second highest tax deduction after investment loan interest repayments and you don’t need to spend any money to claim it. Depreciation is claimed using two categories – capital works and plant and equipment. The first, capital works, is claimed on the building’s structure and fixed assets. This usually makes up 85 to 90 per cent of a depreciation claim. The second category of plant and equipment is claimed on the easily removable and mechanical assets. Don’t make the mistake of dismissing depreciation if you have purchased a second-hand property. While you can’t claim the second-hand plant assets, these properties can still hold thousands of depreciation deductions in the form of capital works and new plant assets. Find out just how much depreciation you can claim from your recently purchased investment property with an obligation-free depreciation estimate from BMT. The team do the work to ensure they achieve the highest deductions available from your investment. To learn more about depreciation, contact BMT on 1300 728 726 or Request a Quote.

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Wanting to attract quality tenants? Here are 10 things they want in their rental

BMT team — Sun, 23 May 2021 23:18:45 +0000

The current rental property market is fierce, making it harder to find the quality tenants for your investment property amongst the applicants. Quality tenants mean a consistent cash flow, long-term leases and lower risks of tenant-related property damage. Holding a property that has what tenants want in a rental is what will help you land the perfect tenant. 10 things quality tenants want in a rental property 1. Location Tenant location demand largely depends on your tenant target market. So, this is where it pays to do your research before buying your next investment property. If your ideal tenant is a working family, then a family-friendly location with ample schooling options in the school zone should be your priority when narrowing down the location of your property. But if your target market is working professional singles or couples, then urban convenience should be top of your list. 2. Maintenance levels Manageable maintenance levels of a property is a win for you, and often for your tenants. This means that while an immaculate garden with exotic but needy plants may look great, it’s not favourable for tenants without a green thumb. The same applies for the indoors, you want areas like the bathroom to be easy to maintain and clean and the floor covering option needs to withstand high levels of traffic. There’s a long list of high maintenance vs low maintenance features of a home. The key takeaway here is to go with the option that’s going to make it easier for yourself and your tenants. 3. Security and privacy When your tenant feels the rental is like home, they will treat it that way. This means they need to feel a level of privacy. Try doing things like giving plenty of notice before scheduled inspections and allowing them to organise times with any required tradesperson. Then comes security. By this we don’t mean security cameras in every corner, alarms and high barbed-wire fences. Getting the basic security features will help your tenant feel more at home. This includes sturdy locks on doors with the option of an interior latch, lockable windows and security screens. 4. Parking Luxury in built-up urban areas comes in the form of off-street parking. While a driveway is dependent on the space you have, you should always offer it as part of the rental if possible. The convenience is a sure-way to attract tenants in competitive urban areas. 5. Little details that makes it feel like a home It’s the little things that count when it comes to rentals and attracting the quality tenants. This means avoid the stereotypical rental property features like painted-shut windows and dodgy DIY repair jobs. Having the property move-in ready with no need for repair should always be at the top of your list before leasing the property. While the upfront costs may seem to outweigh the benefits, it’s important to remember that repairs are 100 per cent tax deductible in the same financial year if the property is genuinely available for rent. If the repairs are completed before the property is available for rent, they can be depreciable as part of a capital improvement. 6. Approachable landlord and property manager Clear lines of communication and transparency are essential when it comes to getting and keeping quality tenants. This is where you need to count on your property manager. Communication is key at the very beginning to ensure expectations with your tenant are met. Factors like repairs also need to be dealt with in a timely manner to keep your tenants happy. Transparency around considerations such as rent increases and inspection requirements are also important for any tenant-owner relationship. When this is done correctly, reliable long-term leases are often obtained. 7. Storage Incorporating storage with the property will make it more comfortable for your tenants. This applies to both the indoor and outdoor areas. Providing an area outside the living space where possible, like a storage shed, can go a long way in terms of tenant-appeal. A big deterrent for rentals is when the owner is using part of the property, like the garage, for their own storage and making it unavailable to the tenant. It’s understandable given they own the property but it’s equally as important to allow the tenant to use the property like it’s their own. 8. Heating and cooling Australian summers can be unforgiving, while winters in some areas can come as a body-shock following the warmer months. Ensuring your property has adequate temperature control is something that will draw tenants in. This means well-suited ventilation to the environment and investing in assets like air-conditioners and heaters to make it a more comfortable place to live. 9. Natural lighting Natural lighting is a healthy way to enjoy the indoors. It can lower electricity bills and bring warmth inside even in the depths of winter. Lack of natural lighting can be inevitable due to the property location, but where it can be helped it should. From the first inspection, natural lighting can make a big impact on prospective tenants. This means providing window coverings that can provide privacy and the option of natural light – like venetian blinds instead of heavy block-out curtains. Or if you are planning on building your next investment property, strategically place windows where they can take full advantage of the sunlight. 10. Modern or upgraded Style preferences change, but generally tenants like to have ‘nice things’ and a space that doesn’t feel outdated. This doesn’t mean only purchase brand-new investment properties – we know realistically this isn’t always an option. But upgrading areas of the property that will add to the tenant-appeal factor can be worthwhile, such as renovating a kitchen, bathroom or removing old carpet and replacing it with new floor coverings. Tenant-appeal isn’t the only benefit of new or upgraded properties. You will also benefit from heightened depreciation deductions. New properties produce higher depreciation deductions in comparison to their second-hand counterpart. Meanwhile, any renovation you complete will unlock further depreciation […]

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Thinking about flipping an investment property?

BMT team — Fri, 16 Apr 2021 05:28:32 +0000

Shows like The Block have us dreaming at the possibility of doing up a rundown property, selling it and making thousands in profit. This has become a popular activity in Australia, and often has some asking, what are some of the implications when flipping investment property? In this article, we will cover: What is property flipping? Why flip an investment property? Key considerations when flipping investment property What is property flipping? Property flipping is a strategy involving the quick turnaround of buying and selling real estate for profit. There are two common ways to flip an investment property: 1. Purchase a low-cost property in an area with expected accelerated price growth, hold onto it short-term and sell at a higher price. 2. Purchase a property that needs work. Not a fixer-upper, but one where minor renovations can provide price increase through capital growth. Why flip an investment property? Property investment is often a long-term investment strategy – so why would a short-term strategy such as flipping be on the agenda? At the end of the day, everyone’s investment strategy is different. For example, maybe you don’t want to do an immediate flip, rather a ‘quasi-flip’, and want to take some time to earn money from the property in the meantime. Whichever the case, there are some key considerations when flipping property, especially one that is also being used as an investment. Key considerations when flipping investment property 1. Timing the market You don’t want your flip to be a flop, so it’s important to understand the market, do the research and time the sale right. You’re not a fortune teller so it’s impossible to determine the exact date that the property needs to be on the market. Instead you need to analyse what the market is doing, keep up-to-date with reputable property researchers such as CoreLogic and Propertyology while not getting sucked into the misinformed media-induced property hype. 2. Setting expectations with tenants Making improvements to an investment property means your tradespeople need access to the property, which of course comes as an inconvenience to your tenants. This is where it’s essential to be transparent and have open lines of communication to avoid disgruntled tenants. Before they even move in, ensure the conversation is had about your plans with the property, establish an agreement (in writing) when improvements are made and leasing terms. For example, offering discounted rent during disruptive periods could be a solution. It gets trickier when you need the tenant to move out temporarily while a renovation takes place. If the tenant needs to find temporary accommodation, they can stop paying rent from the date they leave the property. A tenant may be able to end the lease early if they can no longer live in or can only partially live in the property. For this reason, it’s always recommended to do major works like renovating an entire bathroom after the tenant has moved out. 3. Capital gains tax (CGT) Capital gains tax (CGT) is a tax payable on the capital gain made from the sale of an income-producing asset, including investment properties. Flipping an investment property usually means you want to make a capital gain, so you need to be aware of how CGT will impact the money you walk away with post-sale. Your capital gain isn’t simply your purchase price vs sale price. While many factors impact it, a more appropriate way to look at CGT is the difference between ‘cost base’ of the property (purchase price, capital costs) and the sale price. There are also several discounts and exemptions that can reduce the amount of payable CGT. The most common is the 50 per cent discount which you may be eligible for if you’ve owned the property for over twelve months. Your accountant will be able to provide further guidance on CGT as it’s their area of speciality and ultimately, they calculate any CGT payable. 4. Scrapping Removing assets and structure is part and parcel of renovating. The difference is that when you do this to an investment property, you can take advantage of a process called scrapping. Scrapping allows you to claim any undeducted depreciable value of removed assets. For example if you removed floorboards that still held depreciable value of $1,500 you can ‘scrap’ this as an immediate deduction. A tax depreciation schedule prepared by a specialist quantity surveyor is key to claiming the maximum scrapped deductions during your investment property flip. An accountant will use this schedule to determine the undeducted depreciable value of removed assets, which informs your scrapped deductions. To learn more about how a tax depreciation schedule can help you gain a financial advantage while renovating an investment property, contact BMT on 1300 728 726 or Request a Quote.

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6 common beginner real estate investing mistakes

BMT team — Tue, 16 Mar 2021 21:59:43 +0000

Thinking about getting your foot into the property investing door? With over 20 years of experience, we have seen investors make every mistake in the book. To save you some pain, here are six of the key mistakes we see and how you can avoid them. 1. Lack of research 2. Going heart over head 3. Rushing the purchase 4. Not planning for all expenses 5. Not having the complete team on board 6. Not considering depreciation 1. Lack of research Not doing the research before buying a property can be detrimental and could result in low returns, high levels of mortgage stress and maybe even a failed investment venture. It’s important not to jump the gun and make a big purchase without ticking the research-related boxes. Doing the leg-work early will streamline the purchasing decisions and increase the likelihood of a successful investment. You need to look at things like the location’s property value trends, average rental yields, vacancy rates, employment rates, local infrastructure, the time a property spends on the market and overall demographics. From a financial standpoint, you need to determine how a property purchase will affect your cash flow. 2. Going heart over head The investment property you choose isn’t necessarily the one you fall in love with. It’s the one that is going to make you the best return, while fitting into your overarching strategy. All too often we see investors purchase properties that they can see themselves living in. You should instead be looking at properties with tenant appeal. Things like proximity to local amenities, the property’s maintenance requirements and size are just some factors to consider. 3. Rushing the purchase It’s easy to get excited as you move along the process of buying any property. From the first open home to the offer, inspections, discussions with solicitors and everything in between – it’s easy to get swept up in it all and feel like it’s a race. It’s important to take a step back to avoid rushing the purchase. For investment properties, this includes looking at different aspects such as the property’s likely rental return and capital growth potential. It’s important to consider factors like these to avoid making a mistake and purchasing a lemon of an investment. 4. Not planning for all expenses If the investment is going to be the first property you have ever purchased, it’s easy to forget the additional upfront expenses. The deposit isn’t the only thing you need to save for. You must have a buffer to cover all of the other expenses that comes along with a property purchase. Just some of these upfront expenses include insurances, building and pest inspection fees, lenders mortgage insurance (if required), stamp duty, conveyancing and legal fees. 5. Not having the complete team on board When buying an investment property it’s important to have a team of professionals around you. What your team looks like depends on your individual circumstances, but some of the most common include: Mortgage broker: They will ensure you get the most-suited investor loan on the market and negotiate with the lenders for you. Conveyancer/solicitor: They specialise in property transfers and will ensure you have all the documentary requirements involved with buying a property. Accountant: They will be able to tell you what you can and can’t claim as tax deductions once you own the property. The rental income you receive is included in your taxable income so it’s essential to claim everything you’re entitled to compliantly. Property manager: Leasing the property is what will determine the return on your investment. Having an experienced property manager to look after the end-to-end process of leasing the property will ensure you get on the front foot early. 6. Not considering depreciation Depreciation is the natural wear and tear of a property and its assets over time. As a new investor, you can start claiming depreciation on your rental as soon as it’s available for lease. This deduction is easily missed as you don’t need to spend any money in order to claim it – so essentially, it’s a ‘non-cash deduction’. On average, we find investors a first full financial year depreciation deduction of almost $9,000. It’s important to consider depreciation when determining how the property is going to affect your cash flow. Depreciation has the potential to turn a negative cash flow into a positive one, all while boosting cash flow by tens of thousands of dollars for up to forty years. To learn more about depreciation and how it can provide a boost throughout your investment journey, Request a Quote or call BMT on 1300 728 726.

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What is landlord insurance and is it more expensive than homeowners

BMT team — Sun, 24 Jan 2021 23:20:07 +0000

Maximising returns from investment properties is essential. Protecting your investment is just as important. Investors new to the property scene are sometimes wondering if landlord insurance is more expensive than homeowners. The answer isn’t necessarily straightforward, or a ‘yes or no’ answer that most are looking for. This is because insurance is a complex product, and several individual contributing factors can impact an individual’s insurance premium. In this article, we will cover: What is landlord insurance? Why landlord insurance is essential for investment properties 3 tips when searching for a landlord insurance policy What is landlord insurance? Landlord insurance is a type of insurance the covers an investment property’s structure and any contents owned by the landlord (e.g. carpets, blinds, dishwashers). Some landlord insurance policies include added protection against tenant damage, loss of rent and rent default. While insurance policies vary, the table below provides an overview of the difference between the insured events generally covered. If landlord insurance includes extras like loss of rent, then why isn’t it automatically more expensive than homeowners? It’s ultimately like comparing apples and oranges. An owner-occupied home that has thousands of dollars’ worth of loose assets (i.e. furniture, personal belongings) can’t be compared against an empty investment property even if the property itself is of similar value. If you used the hypothetical of comparing the identical, completely empty property then it is possible for landlord insurance to be more expensive than the homeowners option. But realistically this isn’t possible as an owner-occupier wouldn’t live in an empty house. The key takeaway here is that homeowners is designed for you and your belongings in your home. While landlord insurance is specifically designed for investment property and the risks they face. There are a lot of different sections of cover in insurance policies that just don’t apply for both. For example, if you’re electricity failed and all the food in the fridge spoiled, you can’t claim this spoilage on an investment as you don’t live there but you may be able to with homeowners. The same applies to temporary accommodation if it’s required following an insured event. Why landlord insurance is essential for investment properties Like any investment, rental properties are exposed to risks. Even with the most reliable tenants, the unexpected can always happen. If you don’t hold an adequate level of insurance, you could be out of pocket by thousands of dollars in the event of claim. Not holding landlord insurance also poses the risk of not being covered for the right type of legal liability. For example, homeowners insurance generally has an exclusion to legal liability if the property is used for any ‘business use’, and as an investment property makes income this can be classed as business use. Therefore, if you held homeowners insurance on an investment property you may not have liability cover if someone were to get hurt on the premises. Despite off of this, research suggests that approximately 83 per cent of properties are underinsured. This could be reasons such as not holding the right type of insurance (e.g. only holding home and contents but not landlord) or having the right type of insurance, just not enough. 3 tips when searching for a landlord insurance policy 1. Understand what you need insurance for Is your investment property a short-term or holiday rental, long-term rental, shared accommodation or in a strata complex? There’s no ‘one size fits all’ approach when it comes to insuring property and the first step is always to have what you need to be insured for. For example, a short-term rental such as a holiday home leased for three months of the year doesn’t have the same insurance needs as a long-term rental. 2. Analyse different policy options The cheapest option isn’t always the best and it’s essential to know your options. Know what you are and aren’t covered for, read the fine print and feel comfortable knowing you are covered if the unexpected happens. An insurance broker can assist you in finding an adequate policy, helps you throughout the process and can manage any claim process that may arise. 3. Know the property’s replacement cost Your property’s replacement cost is essentially how much it would cost to completely rebuild your property. This includes factors such as the cost of construction, considering the site constraints, cost changes over time, demolition costs and the removal of hazardous materials. Knowing this will inform how much insurance cover you will need. This is especially important if you’re turning your main residence into an investment property and making improvements before leasing it out. Any improvements, whether due to damage or simply renovating will add value to the property and your insurance coverage must reflect this. BMT Insurance is committed to protecting investment properties with the most suited insurance policy. BMT Insurance works with policy providers and uses extensive construction cost data to ensure the right level of coverage. To learn more about BMT Insurance and to get an obligation-free quote, call the team on 1300 268 467 or Request a Quote.

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