Hi all,
I have recently purchased a house which I am in the process of renovating. All of the major stuff is done with only cosmetic stuff like some painting, blinds/curtains etc to go. I have been approached by an acquaintance (friend of a friend) who would like to rent the place. The amount they are willing to pay is under market rate if the renos were complete however is very reasonable for the current state of the house. They have agreed to let me have full access to the house to continue renovating it as long as I don't increase the rent until after the lease. Questions….
1) They want to pay the full lease up front so I am thinking about not getting a property manager and doing it myself (as I wont ever have to hassle them for the rent). Is this a good idea?
2) Will I be able to claim the full amount of deductions for tax given that as I continue to renovate the market rent will be above what we are receiving?
3) I was going to draw up a lease for approx 4 months (until the end of the financial year). After that I will increase the rent to whatever the market rent is at the time. Do you see any problems with this?
4) Is there somewhere I can get a template for a lease agreement? Or is there any specific things I should include?
Thanks in advance for you help.
Kind regards,
Mitch
1) If the (prospective) tenant has offered to pay upfront, there is nothing stopping you from accepting it HOWEVER if you have demanded/requested more than 2 weeks (NSW) upfront, then it is illegal.
2) Ask your accountant but you should be able to claim depreciation on the works that have been completed – accountant will sort out the timing. You can't claim some things outright because they have been done prior to leasing out the property. & others due to the size of the expenditure ie 'project' will need to be capitalised.
3) A lease can be as short or long as you agree – you will however need to give appropriate notice of the proposed increase, even if it is included in the lease ie NSW 90 days.
4) Standard form leases are available on the NSW Fair trading website – check your state
Thanks IP Freely,
Great name by the way. I am from QLD so I will search for a QLD Fair Trading Website for a lease template.
I will ask my accountant about question 2 as it is the most important one. I have heard of instances where the tax office has ruled that because an IP was rented at below market value the person could not claim the full amount of interest and expenses for their tax return.
Mitch
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