Forum Replies Created
I can’t see a lender doing that, Arb. I settled on a holiday unit on the mid NSW coast earlier this year. I borrowed extra at settlement to carry it through the winter. Right now it’s costing me around $1,500 per month. I’m gambling (or I should say ‘speculating’) that come summer, the tide will turn. Christmas rentals will be around $1,500 per week. It’s going to be at least a year before I know whether the thing will break even or not. I’ve had good capital gain, though, and there are great on paper deductions – over $16,000 in depreciation next year.
Scott
To be honest, my best ‘tool’ has probably been luck, or perhaps trust in my instinct.
I’m yet to buy a dud property, but that day is surely coming. Like many of us, the market over the last few years has done much of the work for me.
Ironically, whenever I’ve thought too long and hard about a deal, I walk away from it (or it walks away from me) – it’s easy to find a reason to not do something.
Scott
Good PMs are worth their weight in gold. They’re certainly worth a premium. But some people dissagree with me on this. I reckon it’s a tough job and doing it well takes alot of skill. Last year I moved from a PM charging 7% to one charging 9%. The new one is amazing. And I’ve now got tenants!
How do you find a good one? Recommendations from other owners and tenants would be one way.
With the one I found, I just asked her why she thought she was worth a premium. I liked the confidence (cockiness) of her answer and she has lived up to it.
Scott
Gee Scullie, tough job.
We deal with hundreds of PMs in the course of our business – arranging inspections for tax Depreciation Schedules.
Average tenure seems to be around 18 months.
I’d say most PMs would breath a sigh of relief if they get through a day without having a run-in with an owner or a tenant.
Having said that, it’s the obvious way to enter the RE business.
Of the major groups, I believe Ray White in Qld and NSW have the best PM training and assistance.
If you’re in NSW, send me an e-mail and I’ll give you the e-mail address of the person who does all the PM recruiting for that state.
While you’re on the ATO site, you might also have a look at TR 97/23 for some detailed information.
Do a search in the Legal Data base under TR 97/23
Hi Brian,
There have a been a few strings about this topic in the last few months – being tax time. Do a search and you’ll find them.
There is an ATO document (sort of a press release) that you’d find doing a search on the ATO site. It’s called Rental Property Deductions for 2004. There are only a couple of pages.
In part, it states that initial repairs ‘such as rectifying damage, defects or deterioration that existed at the time of purchase’ are regarded as capital expenditure and not immediately claimable.
As a rule, it’s an idea to try and get tenants into a property and start earning an income from it before you start fiddling with it.
Regards,
Scott – Depreciator 1300 660033
We get asked occasionally about tax depreciation Schedules in NZ but haven’t yet ventured across there – plenty of business in Australia.
I imagine you’d still need an appropriately qualified professional to estimate building costs.
The general principle are the same.
There is no cut-off for building depreciation in NZ, though i.e. buildings of any age can be depreciated.
Scott@Depreciator 1300 660033
In answer to your question on useful sources of information on depreciation, I’m afraid there aren’t many.
It’s hard work wading through the ATO site.
My site http://www.depreciator.com.au has some stuff but it’s a bit lame in parts. Updating it and adding more information is one of those jobs we never quite get around to.
To be honest, this forum would be the best resource around. Do a search under ‘depreciation’ and there will be plenty of reading.
Or feel free to give me a call if you have loads of questions and don’t want to post them all.
Scott 1300 660033.
Don’t forget also on older properties that any renovations carried out after Feb 26, 1992 can be depreciated. And it doesn’t matter who did the renos i.e. you or a previous owner.
Scott
The comments about building quality probably apply to some Australia locations.
One of my QSs just did an inspection on a new building in Sydney. He was lamenting the quality of the work. Lots of apartments these days have single brick exterior walls and plasterboard internal walls. They look okay, but they’d be noisier.
He rarely sees a building either where there aren’t problems with the cement render – cracks etc.
And as I’ve said in another post, as soon as the east coast has one of those 10 day rain spells there will be lots of leaking buildings. It’s been a couple of years since we’ve had that sort of rain and there are lots of buildings that haven’t had their waterproofing put to the test.
Of course anything built on clay will also move around a bit when that clay get its first decent soaking and starts to expand.
Relevant to this issue of building quality are the changes to Home Owners Warranty Insurance in NSW. I recall hearing early this year (and I’m going off my memory here) that buildings over 4 stories that were commenced after January 1 this year will not be covered by HOW Insurance. This means any defects that show up have to be fixed by the builder, if they’re still around. Somebody please correct me if I’m wrong on this. It’s not really something that concerns me, so I didn’t pay much attention to it at the time it was announced.
Scott
Or if you make improvements to the property that enable you to increase the rent.
Of course, on the flip side it’s also easy for a +ve geared property to become -ve.
I’d say very few accountants know about it either, Bennido.
We’re a depreciation service provider to the Count Wealth group – 700+ accountancy and planning practices nation wide. I canvassed some Count Members at their national conference and not many knew about it. I was talking to a Count guy recently. He had just been to an NTAA training session (NTAA are a huge, credible industry training group). They flagged this obscure rule and apparently the audience of accountants was gobsmacked.
It’s not well publicised. I guess in the event of an audit it’s something that the ATO may pull out.
Scott
Regrow,
Those are questions for an accountant and I’m sure one will jump in – Julia perhaps.Life,
It’s only depreciation claimed on the building (not fixtures and fittings) that is deducted from the cost base for CGT calculations. But upon sale, any investment property purchased after May 13, 1997 must have the building depreciation eligible to claimed during ownership deducted from the cost base whether it is claimed or not. So investors may as well claim the depreciation.I’d say there will be a few people with delivery of CE apartments pending who will be interested in the outcome.
Robo,
I wonder whether a Hebel product would work? I think Hebel ‘render’ is a 3mm skim coat. Not sure whether the surface has to be primed, or whether there even is a Hebel primer for that matter.Michael is right. You need to give some definition to what you’re thinking about before anyone will be able to think about an estimate.
There is a QS in Nowra who might be worth talking to – John Eastment.
What about taking a photograph of the sort of thing you’d imagine building – go for a drive round the area where the land is and you’ll see something – and running it past a local QS/Estimator/builder?
Or send it to me and I’ll ask one of my guys what they think.
You could also go down the project home route. At least their designs are costed and available on-line to look at.
Gee, those cavities must be cavernous – I’m thinking the walls must be at least a metre thick. Even if Central Equity were to allocate cavity space to floor area, it could surely only equate to one percent or so.
I’m not sure whether the fact that a size was quoted on a brochure will be enough to help you. There were no doubt disclaimers on some of their material that talk about areas quoted being indicative etc. It’s time to talk to a legal person.
As an aside, anybody taking delivery of something they bought off the plan should bring along a tape measure when they do their pre-settlement inspection.
Ggreg,
Send me an e-mail and let me know where you’re looking at building. If I’ve got a guy nearby, I’ll put you in touch with him. A conversation isn’t going to cost you anything.
Hi Derek,
Yep, the total amount claimable is of course the same regardless of what method is used.
Perhaps Celivia has some items with effective lives of over 10 years.
Floating timber floors, for example, now have a 15 year life. Using the PC method the depreciation per year is the same for all 15 years. Using the DM method, there would be very little to claim after year 10.
With carpets, which have an effective life of 10 years, the total claimed over the 10 years is the same.James, I’m not exactly sure what you mean by your question.
I guess in a nutshell, Quantity Surveyors have a uni degree, while Estimators have taken a trade route to where they are.
Estimators generally stick to estimating costs, while QSs sometimes do a broader range of things – tax work, sinking funds etc.
In our network I have a mixture of QSs and estimators. They’re both able to (and qualified to) estimate building costs and the value of depreciable assets for our purposes. We don’t require them to know the tax stuff – we take care of that end.
You may find an estimator cheaper. You may find them also a bit more site savvy, if you know what I mean. And in regional areas, at least you’ll find them – QSs tend to be thin on the ground outside of metro areas.
