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

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

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

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Can you claim depreciation on your rental property when selling?

BMT team — Tue, 17 Nov 2020 21:59:32 +0000

Deciding to sell your residential investment property is an important decision. Whatever the reason for selling may be, you must continue to maximise your property’s cash flow while it’s still yours. Claiming depreciation on your rental property when selling is possible, but it can be tricky. In this article we will answer: Can a property still be used as an investment while it’s for sale? Can you still claim depreciation on your rental property when selling? Can you claim partial year depreciation deductions while the property is for sale? What happens after the sale? BMT is here to help throughout your investment property journey First, can a property still be used as an investment while it’s for sale? Yes. How this works depends on the current lease agreement. If your tenant is on a fixed arrangement you must continue to honour this unless a mutual agreement has been reached for the tenant to exit early. This applies to every State and Territory and a new owner must also honour a fixed-term agreement. When the lease is a periodic agreement it works differently depending on which State or Territory the property is in. For example, in Queensland you can give your tenants four weeks’ notice once a contract of sale has been signed, while in Tasmania you can give your tenants 42 days’ written notice. Can you still claim depreciation on your rental property when selling? The property is still costing you money, so it’s important that you continue to do what you can to minimise costs and boost your cash flow. The good news is that if your property is genuinely available for rent, even if it isn’t physically tenanted, you can claim depreciation and all other expenses. The Australian Taxation Office (ATO) has several requirements for a property to be classed as genuinely available for rent. One requirement is when ‘having regard to all circumstances, tenants are reasonably likely to rent it. There’s no doubting that it’s harder to attract quality tenants while a property is for sale. However, you can introduce some strategies to make it easier like a discounted rental rate or including some utilities like water usage, electricity or internet. Can you claim partial year depreciation deductions while the property is for sale? You can’t predict how long your property will be on the market before it sells. If it’s still genuinely available for rent during this time, don’t forget about partial year deductions. For example, if you put the property up for sale May 2020 and it sold in September 2020, you can claim a full year depreciation deduction for the 2019-20 financial year and a partial year depreciation deduction for the 2020-21 financial year. Partial year deductions boost cash flow by thousands so it’s important to claim them at tax time. What happens after the sale? Once the property is sold and settlement is complete, you can no longer claim depreciation on it. Remaining capital works entitlements pass onto the next owner if they choose to continue to use the property as an investment. They can’t claim depreciation on existing plant and equipment assets in residential properties due to legislation introduced in 2017. Another factor to consider after sale is capital gains tax (CGT). This is a tax charged on the profit, or capital gain, made from the sale of an income-producing asset. Several factors affect how much CGT is available, discounts and exemptions can also apply. CGT is very complex, and the key step is to discuss the topic with your accountant both before and after the sale. They are experts in this area and will provide further guidance. BMT is here to help throughout your investment property journey BMT Tax Depreciation can help you make the most from your investment property. You can take advantage of depreciation deductions at any stage in your investment property journey, ensuring your cash flow is maximised to its full potential. To learn more about how you can benefit from claiming depreciation, call the BMT Team on 1300 728 726 or Request a Quote.

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Does depreciation affect capital gains tax?

BMT team — Mon, 11 Nov 2019 22:57:07 +0000

Capital Gains Tax can seem complicated, especially when considering the implications of property depreciation and applicable discounts. It’s unsurprising then that many property investors ask, does depreciation affect capital gains tax? In this article we explore capital gains, when and how it applies and the role of tax depreciation. In this article, we will answer the following questions: What is capital gains tax? Does depreciation affect capital gains tax? Did 2017 legislation changes affect capital gains tax? How does depreciation benefit investors? What is capital gains tax? Capital gains tax (CGT) is a tax you pay on the profit or capital gain made from the sale of an investment property. A capital gain is the difference between what you paid for the property (your cost base) and what you sold it for. It’s included in your assessable income in your annual tax return and taxed at your marginal rate. A net capital gain is your total gain minus your total loss for that financial year. It can also include any previous unapplied net capital losses and any CGT discounts or concessions. To find out when the tax applies, read When do you pay capital gains tax on investment property? Does depreciation affect capital gains tax? Depreciation can change your cost base and therefore affects CGT. Depreciation deductions can be claimed under two categories – plant and equipment deductions and capital works depreciation. Both can affect your cost base in different ways. Plant and equipment assets are items which are easily removable from the property such as carpet, hot water systems and blinds. These assets have a limited effective life as set out by the ATO and can generally be depreciated over time. When a property is sold, plant and equipment assets are removed from both the purchase and selling price and calculated separately. The value of the plant and equipment at sale and the depreciation claimed in some circumstances can affect the capital gain or loss. Capital works deductions refer to the building’s structure and items considered to be permanently fixed to the property such as kitchen cupboards, doors and sinks. This type of depreciation is claimed as a loss and reduces your cost base, as the amount gets smaller and smaller each year. This loss adds to the capital gain and increases the amount of CGT applicable. Keep in mind that although claiming depreciation can increase CGT, the 50 per cent CGT discount is available to those who hold an asset for 12 months or more. Because of this, the deductions claimed throughout ownership are 50 per cent more valuable than the potential increased CGT liability when the property is sold. There is also an added opportunity to invest that extra money or to reduce loans throughout ownership. Did 2017 depreciation legislation changes affect capital gains tax? In July 2017, plant and equipment depreciation deductions were limited to only those outlays actually incurred by residential property investors. Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. It’s important to note that new properties are unaffected by the changes. Capital works deductions for structural assets are also unaffected and can still be claimed by owners of income-producing properties. These deductions typically make up 85-90 per cent of a total depreciation claim. A capital loss can be calculated when a plant and equipment asset is disposed of for less than its original cost, and depreciation claims were denied because of the changes. Examples of asset disposal can include when an item is scrapped or sold as part of the sale of the property. Under CGT rules, a capital loss can generally be offset against a capital gain. If there is no capital gain in the current year, the capital loss can be carried forward and offset against a future capital gain. In order to calculate a capital loss on disposal, the original cost of the asset as well as the asset’s end value will need to be determined. Given that CGT is very complex and there can be a variety of outcomes for investors depending on their specific circumstances, it’s important to consult with your accountant. How does depreciation benefit investors? As the owner of a residential investment property, claiming maximum depreciation deductions can make a big difference to your cash flow. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim depreciation deductions for the natural wear and tear that occurs to a building and its assets over time. Any income-producing property may be eligible for thousands of dollars in depreciation deductions. A tax depreciation schedule is the best way to ensure every deduction is found and maximised. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property and provides accountants with the necessary information to calculate capital gain or loss. A BMT schedule has a one-fee and is 100 per cent tax deductible. During the FY 2018/19, BMT found residential property investors an average first year deduction of almost $9,000. For more information, Request a Quote or speak with one of the expert team at BMT Tax Depreciation on 1300 728 726.

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How do I choose a Real Estate Agent?

BMT team — Wed, 21 Nov 2018 05:52:55 +0000

Choosing the right Real Estate Agent to sell your property or buy an investment property can be daunting. When selling, you want to know that your home is in good hands and well placed to fetch an attractive sale price in the current market. Buyers want to find a trusted and reputable Agent who will transparently help them to grow their property portfolio. While we can’t tell you exactly which Agent to choose, here are some things you should look out for when choosing a Real Estate Agent to buy or sell property. Local knowledge Knowledge of the local area is a major advantage for Agents when selling property to potential buyers. Agents should have the necessary knowledge to answer potential buyer’s questions about the area and be able to add value to the property by talking about its proximity to local facilities. Buyers will feel much more comfortable buying a property from an Agent who knows the area and can talk about local schools, hospitals, shops and other facilities. If a buyer is new to the area, they will want to be reassured that the property and its location are a good fit for their lifestyle and will cater to their needs. It is important that Agents can confidently sell both your property and the suburb in which it lies. If you’re looking to buy an investment property, choosing an Agent with good local knowledge will be a huge advantage when it comes to finding a suitable property with good growth potential. Flexibility Selling property is an involved process and Agents need to have enough time to dedicate to the sale of your property. Agents can quickly find themselves run off their feet managing multiple property sales and vendor relationships. If an Agent is not contactable or is too busy to meet, this will not only cause frustration for yourself, but it can be a major deterrent for potential buyers. Remember, if an Agent is not contactable at this stage when they should be trying to win your business, there is little chance that they will be able to competently manage the sale of your property. It is crucial that Agents can work around busy schedules and conduct open homes at convenient times for buyers. Buyers also expect Agents to dedicate time to them to answer any questions they have about the property, so they will need to be available for the buyer. If you are choosing a Real Estate Agent to purchase an investment property, it’s important that you look for an Agent who is flexible and can work around you. Are they depreciation savvy? For buyers looking to purchase an investment property, depreciation is a major drawcard. Depreciation makes owning an investment property much more affordable due to the tax benefits. This means that a depreciation savvy Real Estate Agent will be able to use depreciation as a selling point to investor buyers. Agents can use BMT Tax Depreciation’s online depreciation calculator to provide potential buyers with an estimate of the likely deductions they would receive should they purchase the property. If you’re selling your property, this may be the incentive a buyer needs to make an offer. You should carefully choose a Real Estate Agent who is able to add value for buyers, has the necessary local knowledge to answer buyers’ questions and can dedicate time to ensuring your property buying or selling experience is a positive one.

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Your seasonal guide to buying and selling

BMT team — Fri, 13 Apr 2018 02:05:12 +0000

If you’re planning to buy or sell a property, you’re bound to get advice from friends, family or acquaintances on the best time of year to do so. “Don’t try and sell in winter, the market is too quiet then.” “You be best waiting until spring selling season to buy.” While such advice is well-meaning and not completely inaccurate, there are a myriad of factors that come into play for a successful home purchase or sale. It’s important to look at the bigger picture and consider trends in the market at certain times of year, and how this may aid or hinder you in your mission to buy or sell. As such, here is a seasonal guide to buying and selling to give you an overview of what generally happens in the real estate market year-round. Summer There are some major advantages to selling in summer: The extra lighting will usually improve the look and feel of a home Buyers may have more time for house hunting if they have some time off work over the summer The garden generally looks more inviting and well-kept at this time of year This is traditionally the time of year when people are relocating for new work opportunities, education or other life changes that typically happen around the new year, so you may have a larger pool of people looking to buy. On the other hand, there are a few downsides to a summer sale that you’ll need to consider: If it’s very hot, this can make inspections unpleasant, especially if your home traps a lot of heat or gets a lot of direct sunlight Prospective buyers may be away on summer holidays and you’ll have to allow for public holidays, including Christmas and New Year, which may slow proceedings down a bit If you’re buying you may also face this delay and Whether you’re buying or selling, you may find this a more stressful time if you’re looking for a home while preparing for Christmas and if you’re relying on selling your home before the new year. You’ll also face a move in the summer heat. Insider tip: If selling and holding an open house on a hot summer day, make your home pleasant and cool with air conditioning and consider having refreshments on hand for house hunters. Autumn Despite the common belief that spring is the best time to buy, research has found that autumn is actually the busiest time for the property market, based on the number of sales by month and season over the past thirty years. For both buyers and sellers, this may mean increased competition from other house hunters and sellers, but more options on the table for buyers. For sellers, this competition may mean a higher selling price. The weather at this time of year also makes for more pleasant house hunting and moving. Winter Typically the quietest time of year in the real estate market, Winter can actually bring some good opportunities for both buyers and sellers. For sellers, there are typically less other properties on the market, meaning less competition from other sellers. If your house is west-facing, it may be a good opportunity to showcase the great winter sunlight your house receives. However, this time of year can make issues such as mould, leaks, bad lighting and a dying garden more apparent. For buyers in a quiet market, there may be more room for negotiations and a lower selling price, if there are not many other interested buyers. Insider tip: When holding open houses in winter, aim to make your home warm and inviting and a place house hunters want to stay for a while and have a proper look around, rather than rush out immediately because it’s so cold. If you’re a buyer, pay particular attention to the potential issues mentioned above such as mould and leaks. Spring Like clockwork each year as the weather starts to heat up after a long, cold winter, so too does the property market. As it’s commonly known, Spring selling season provides some great opportunities for buyers. There are more properties on the market which means more choice and the greater chance of finding your dream home or a suitable investment. But it does mean more competition from other buyers which may reduce the chance of negotiating a lower price. If anything, the seller may be able to negotiate a higher sale price for themselves if they have more interested buyers. While autumn may typically have the most sales, it doesn’t stop home buyers from believing the hype and turning out in droves to spring time open homes. Sellers should pay particular attention to how they present their properties at this time of year, to make sure it is up to scratch with all the others on the market. The verdict From reviewing these trends, it may seem that certain seasons may provide an advantage or disadvantage for both buyers and sellers. However, it is important to be aware that the season or time of year will not solely determine a successful purchase or sale. There are so many other factors to consider including interest rates, location, the state of the property, price, demographics and any repairs required. However, if you take all of these factors into account it is possible to negotiate a successful purchase or sale all year round, and you shouldn’t let the seasons dictate your movements too much.

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Can staging help you sell your property?

BMT team — Thu, 12 Oct 2017 01:18:43 +0000

It goes without saying that if you’re selling your home, you want to present it in its best possible light. For an increasing number of Australian home sellers over the past decade, how they present their property for sale has evolved. For a growing number it has changed from giving the house a good tidy, opening the blinds and perhaps even baking some fresh bread to getting the home professional staged throughout. In a nutshell, home staging is when you (or a professional home stager or agency) style and furnish a home temporarily to enhance its appeal. The fact this is becoming more and more common is unsurprising when you consider the difference it can make to the interest a property receives and the ultimate sale price. A survey of the top real estate agents in LJ Hooker’s Australian network revealed that styling your home could boost the final sale price by between 7.5 per cent and 12.5 per cent. Furthermore 87 per cent of agents said you would earn a higher price by property styling while 48 per cent thought styling would lead to an increase in offers. If you’re looking to get the most from your property at a sale – and to be honest, who isn’t – this strategy is worth considering for a number of reasons: A visually pleasing and inviting property may attract a greater number of interested buyers who have seen the styled property advertised. More interested buyers may lead to several offers and a higher sale price for the seller It can increase the perceived value of the home Staging can distract from any less than appealing features, which can really stand out in a bare room It can show buyers how to best make use of an unusual floor plan, which may otherwise turn them off the property A property decorated with the right furniture can make a room or whole house appear larger, as opposed to an empty home or one furnished out of proportion Getting your house professionally staged is a great way of depersonalising the space. A space too personal can make potential buyers feel like they’re intruding whereas a well-staged home allows viewers to imagine themselves living there. It can also help attract a specific demographic you’re trying to target. For instance, if it’s an inner city apartment, it may be styled to attract young professionals as opposed to families It can tap into buyers’ emotions more than an empty home and get them more invested in the property It can give an older style property a new lease of life and show its potential to buyers It goes beyond selling the brick and mortar of a home and works to sell a lifestyle too It can help a property stand out from the crowd in a competitive market It photographs better, which will improve advertising and ideally bring more parties in to inspect With all these benefits, it begs the question, why aren’t all sellers staging their homes? Well that brings us to the most notable downside – the cost. Getting a home professionally staged can be quite pricey. Costs vary depending on the size of the property, the number of rooms you want styled and how you want it styled. Any buyers considering this strategy should carefully weigh up the costs of home staging and consider whether the fee will be met and exceeded by a higher sale price. There’s no point staging a home for $15,000 if it’s only going to fetch you a $5,000 higher sale price. If you are interested in home staging but have a tighter budget, consider staging a few select rooms. Concentrate on the main areas of the home such as the lounge room, dining room, kitchen and master bedroom and leave rooms such as spare bedroom or the second bathroom empty to cut back on costs. Another downside to be wary of is any staging clichés. Opt for arrangements that will highlight the best of your home and avoid tacky touches like rose petals in the bath, champagne glasses on the bed or bath towel swans on the vanity. This is where it’s important to do your research if you’re hiring a professional and review their past work. If you’re an investor, you may be wondering if it’s worth staging your rental property for inspections and advertising photos. While this does have some merit in high end luxury homes, the cost isn’t usually justified for most rental properties and the cost often cannot be covered by any rental increases.

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Is spring really the best time to buy?

BMT team — Wed, 27 Sep 2017 00:02:55 +0000

It’s known as ‘spring selling season’; the time of year where a surge of properties come on to the market. With all this extra stock and the weather starting to warm back up, spring is often touted as the best time to buy or sell property. So how much extra stock comes on to the market at this time of year? According to property research firm CoreLogic, an extra 1,000 auctions per week are expected over the next three months across all capital cities. This is a jump from about 1,500 to 2,000 per week in winter, to 3,000 per week across the country in spring. However, further data from CoreLogic suggests that despite this increase, spring is actually not the busiest time of year on the property market. Based on the average number of sales by month and season over the last thirty years, it is autumn that comes out on top. Twenty-seven per cent of all sales over the last three decades have transacted in March, April and May, with the most popular month for sales being March. According to this study, spring is the second most popular time to buy. This raises the question of whether spring selling season really the best time to buy and sell property. Statistics aside, we take a look at the pros and cons of buying and selling as the weather warms up. Pros of spring selling season With more properties on the market in springtime, there is greater choice in terms of housing type and features. This means there is a higher chance of finding the property that’s right for you Spring selling season is usually more advantageous for sellers. Despite the greater number of other sellers, there are more buyers on the market and more competition for properties, meaning the seller may have more room for negation and competing offers, potentially leading to a higher sale price With the winter gloom on its way out, properties tend to present in their best light in spring. Gardens are blooming, there’s more natural light and things look brighter and better overall The warmer weather tends to lure more people out to open for inspections, meaning more traffic at open houses for sellers Given the timing of the year, a spring sale allows buyers to move in and get settled into their new home before the madness of the festive season Cons of spring selling season There is more competition for both buyers and sellers. Buyers will have more potential buyers to compete with, lowering their chances of landing their dream property while sellers will also have to ensure their house stacks up against all the others on the market. In a quieter market, buyers may have more chance of negotiating a lower price with the seller. This is less likely to happen if there are several buyers interested. In fact, prices are more likely to go the other way if counter offers are put on the table. Given the busyness of this season, it’s likely to be a more stressful and faced paced transaction (unless the owner makes it a slow process to get a higher price, then it will just be stressful!) With properties presented in their best light, it might be easier to overlook flaws, so pay extra attention at open houses. With spring light pouring in, you might not see for example how gloomy it can get with its lack of light in winter or that it’s prone to mould. Other considerations Research the statistics for your particular city, region or suburb to determine the best time to buy and sell there. Remember that all property markets across Australia are different (what’s happening in Sydney is often quite different to the market in Perth or regional South Australia, for example) so spring may not be the best time for buying and selling in your area. Furthermore, sellers may benefit more from selling at a different time of year due to their location and type of property. For example, if it’s in a holiday location, a house on the market in summer might attract a wider audience and greater range of buyers who happen to be in the area. Alternatively, if your house has great natural light in winter this may be a better chance to show it off. Finally, it’s important to buy and sell at a time that is right for you. While you always want to keep market conditions in mind, there’s no point rushing in to buy in spring if your finances aren’t quite in order and you’d be in a better financial position to buy in summer. No matter what time of year you buy a property, if you’re an investor buyer it is important that you are claiming all of the depreciation deductions you’re entitled to in order to maximise your returns. For more information, contact our expert team on 1300 728 726 or request a quote online.

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