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One of the things the Reno Kings advocate for adding value is turning a 2 bedder into a 3 bedder by reconfiguring some of the spaces. Easier to do in Queensland where much of the housing stock is timber construction. Yep, I’m sure some of those additional bedrooms are on the small size.
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http://www.depreciator.com.auScreamin,
Apparently the average wage just crept over $50K. I know this because when I walked into the office this morning, Anna (who handles all our accountant affiliates) said: ‘Do you think I’m below average?’ I said: ‘No, of course not’. So she asked me whether she could have at least the average wage and shoved the Herald article in my face.Tax Depreciation Schedules
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http://www.depreciator.com.auI reckon there are more people than we think who secured Loc Doc Lines of Credit against the equity in their PPOR and they’re gradually drawing down on this to meet living expenses. If they got the LOC last year, their property was probably worth more than it is now. Oh dear.
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http://www.depreciator.com.auGood idea to go and have an informal chat with the council. They’re pretty approachable at Marrickville.
Take along photos of the properties nearby that you mentioned so you can better explain what you want to do. Be aware that planning rules change over time. Remember there was a time when dual occupancy developments were very popular all over Sydney, but then lots of councils had a rethink.
I know someone in Newtown (next suburb) who built a self contained flat in their back yard with rear lane access. They had council approval. The flat is rented out to Sydney visitors at $120 per night. There is alot of demand for this type of accomodation in that area. This might be something you could consider – it’s good income.
GreatPig,
Lots of terraces and semis (joined to another house on one side) in Enmore. In some inner city suburbs, 5.5. metres width is a luxury. There are plenty of terrace houses that are 3-4 metres wide. They were the precursors to the modern project home.
As an aside, a hundred years ago, developers would buy parcels of land in the inner west, subdivide them them, and sell off the blocks. The language they used on the marketing material was the same as that used by developers today. Spec builders would sometimes buy a block of land, bung up a row of half a dozen terraces and flog them off. My great grandfather built a row of 6 terraces in Balmain to rent out. And then somewhere along the line, some dope in my family sold them.
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http://www.depreciator.com.auUnlike Australia, depreciation is claimable on buildings of any age in NZ.
We’ve often toyed with the idea of expanding into NZ, but I’ve been unable to find people on the ground with the skills I need – especially in regional areas.
Not sure about Agile’s comment regarding depreciation not being claimable on positively gearded properties. That sounds odd.
Depreciation rules are more simple in NZ, so a report shouldn’t cost as much as they do over here.
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http://www.depreciator.com.auHi Waz,
No need to get a Tax Depreciation Schedule done at time of purchase, though if tenants weren’t in there it would have been easier.
Depreciation is just an outgoing, like rates, management fees etc. You claim it as an outgoing when you do your tax (Unless you opt to vary your tax).
If they’re older properties and in country areas (I’m assuming they might be) the cost of getting a report done may outweigh the benefits. If the age of the buildings makes them ineligible for the Special Building Write-Off, you’ll only be able to depreciate the fixtures and fittings, and you are able to ‘self-assess’ these.
Send me an e-mail with some details about the property. I may be able to help you free of charge.
Scott
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http://www.depreciator.com.auI’d say alot of accountants will ignore it.
The dilemma for an accountant is according to the ATO, they don’t have the qualifications to estimate construction costs, yet in many cases the depreciation available on those costs will be deductible whether it is claimed or not.
So if the original costs aren’t available, they will have to be estimated by people like us.
In that ATO/AIQS seminar I went to a couple of weeks ago, the ATO guy said for the first time this year the ATO were going to check construction cost estimates. The ATO don’t have any staff QSs, so I don’t know how they’ll do this.
Hmmmm. Could be a lucrative contract to pick up.
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http://www.depreciator.com.auI don’t think Margaret Lomas sees herself as a ‘Jan Somers’. They’re very different people. Margaret is a financial planner, so she is cautious. She is however a planner who loves direct investing in property, so that sets her apart from many planners.
Freedom mentioned that seminar a few weeks ago that Margaret and I fronted. Yep, there would have been close to 500 people there. And I’d say all of them were there to see Margaret, and not me, though I got more laughs.
It was a different talk to the ones she’s done before. She went through her portfolio – it’s not huge – and talked about what she had bought, when and why. And she freely admitted a few mistakes. She is definitely an advocate of the ‘get rich slowly’ approach.
Not sure what her consultants are like and I don’t know much about what sort of model they follow. Liek any organisation, some would be better than others.
I think she’ll weather any changes in the market just fine – property isn’t her only source of income. And she’s pretty cluey.
I have no affiliation to Margaret or her group, though we’ve done Schedules on her properties and for those of some of her clients. We extend to them the same discount we extend to members of this Forum.
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http://www.depreciator.com.auI’m not an accountant, but I’ll answer anyway.
You’ve got part of the story, Pete.
1. Depreciation claimed on the building has an impact upon CGT calculations, but not depreciation claimed on the Plant i.e. Fixtures and Fittings/Depreciable Assets. And in most cases the depreciation claimed on those items in the first 5 years is greater than that claimed on the building.
2. If an investment property purchased after May 13, 1997 is sold, depreciation eligible to be claimed on the building must be factored into CGT calculations whether it has been claimed or not. So you might as well claim it.
Very few accountants know this obscure rule. I mentioned it in a seminar I gave earlier this year to 100 or so accountants and I don’t anybody in that room knew about it.
Buggered if I know how the ATO would enforce it.
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http://www.depreciator.com.auI’ll offer an objective, polite answer to your quite innocent question, Alvin.
I’ve got city and country properties.
Yes, I’ve bought properties without seeing them and done well. Of course, I bought a couple before people like me from shitty big cities started buying indiscriminantly and pushing the prices up, so I rode that wave.
In hindsight, I didn’t do nearly enough research, but the market helped me. I took a few punts and they paid off both in terms of cash flow and capital gain. These days it’s tougher and I wouldn’t be ‘punting’. You need to do alot more homework – or use a bird dog who does some of it for you.
There are still good +cf properties out there if that’s what you’re after. I know, because I’m in the process of selling one.
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http://www.depreciator.com.auIt’s very easy to ‘go wrong’ in Mt Isa. We’ve got some clients who have done just that. It’s a town that is fairly spread out. As you’d expect, there are good places to invest and lousy ones. I’ve got QS who travels there for us (to do Tax Depreciation Schedule work). According to him: ‘When the mine is doing well, the town does well.’ Rents are good, but the tenants can be transient.
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http://www.depreciator.com.auSounds good to me. I’ve got a couple of places in Sydney.
In answer to your question, what you should try for is a good property manager who is going to do their job. And they’re not easy to find.
I honestly don’t see the point in choosing a PM solely on their management %. Do you choose the cheapest accountant? A PM is managing an investment that is possibly worth hundreds of thousands of dollars.
I moved recently from a PM in Tasmania charging 7% to one charging 9%. The increase in occupancy rates has more than covered any additional PM costs.
But that’s just me.
I reckon it might be an idea for to make a post saying: ‘I’m about to rent out a property in XXXXX. Can anyone recommend a good PM?
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http://www.depreciator.com.auHi Andrew,
In the sale of commercial property, there are often written-down values of assets noted in the contract of sale. I don’t think I’ve ever seen a residential contract with written-down values of assets.
Essentially, what we do is put a value on the assets – stove, carpet etc – as of the first available to let date. The best way to explain it is that it’s a second hand replacement value i.e. if you had to replace that oven with an oven of a similar make and condition, what would it cost. This is an ATO prefferred method of valuing ‘plant’.
If you’re looking for +cf property, you’re probably looking away from major centres and you’re probably looking at properties where the building write-off won’t come into it i.e. properties built before 85. So the cost of getting a QS there may be disproportionate to the return in depreciation. You are allowed to ‘self assess’ the value of Depreciable Assets/Plant. If you give me a call I can talk you through this. Then you’ll be able to claim any available depreciation and it won’t cost you a cent.
I’d be wary about depending upon depreciation to make a purchase stack up. I look at depreciation as a bit of ‘cream’. Also, with older properties, much of the depreciation is claimed in the first couple of years.
Hope that all makes sense.Tax Depreciation Schedules
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http://www.depreciator.com.auSmall blocks of units have always been good for me. I’ve got a couple of blocks at the moment – one in Tasmania performs particulary well. It’s 6 x 1 bedroom units. There is a fairly high turnover of tenants and they tend to be single men, but when I’ve got one vacant I’ve still got income from 5. You need a good property manager.
I’d use a buyers agent. Won’t cost you anything. Get in touch with Minimogul or Westan on this site.
Calder,
Just email your name and job number if possible. (Better also send the property address as a cross check.) One of the boys will call you and get your credit card number and they’ll refund the discount.
And beware of anybody quoting 4% (vs 2.5%)building depreciation allowance on these properties (and on holiday units) based on the interpretation of ‘Short Term Traveller’. I went to an AIQS (Australian Institute of Quantity Surveyors) and ATO seminar last week. The ATO said this is something they’re on the lookout for.
I’ve got an Interpretative Decision from the ATO on file if anybody wants to see it.
[email protected]I understood what Paulusi was getting at.
And I’m all for shuffling things around.
I still think that if the Abbotsford property is well situated, I would hang onto it.
At least it hasn’t dropped in value like some inner city apartments. To me that implies she didn’t pay an inflated price.
Paulusi said she would would be losing money if she sold it. There has been no gain, so the losses may include stamp duty etc on the way in and agents commission, advertising etc on the way out.
These losses Paulusi said would reduce her PPOR equity.
Even if that loss was only, say, $20,000, that’s going to take a long time to claw back from +cf properties.
Maybe the Auburn one could be sold and the loan on the Abbotsford one reduced?
Then again maybe I’m completely wrong.
Not sure that I’d be too hasty getting rid of a property in Abbotsford. There may be a pause in prices now, but it’s a great suburb. Granted, there are some less than great parts in every suburb. Where is the property?
ScottDon’t forget to also consider the CGT issues down the track in declaring income from your PPOR and claiming expenses. Discuss this with your accountant.
Scott
