Forum Replies Created
Hi Fudge111,
Residential buildings built after 17 July 1985 depreciate by 2.5% per annum of the original construction cost. This can be claimed for a total of 40 years with year one providing you with the highest claims.
Because you receive the most depreciation in year one, buying a brand new property or a property off the plan allows you to reap in these savings, which an older property won’t be able to provide you with (unless you renovate it, or it has been renovated). Also, say you purchase an established property that was built in 1987, this makes the property 28 years old this year, meaning you only have 12 years left to claim depreciation.
You can claim depreciation on internal fittings and fixtures, which includes things like carpets, air-conditioning systems, blinds and microwaves. These can depreciate from anywhere between 10% to almost 40% per annum for the first five years depending on the initial cost. If these items cost less than $300, these costs can be claimed straight away.
As Corey mentions, it is best to seek the advice of a Quantity Surveyor and get a depreciation schedule drawn up to know exactly what you can and cannot claim.
Don’t forget that depreciation is a way to reduce your taxable income and can only be claimed on investment properties that are producing an income, but you should not be solely buying an IP based on reducing your tax.
Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
I would agree with Corey. It all depends on your situation and how much risk you are prepared to take. If you prefer to know exactly what you will be repaying each month then you might prefer a fixed rate loan.
At the moment, interest rates are very low so it makes a great time to fix your loan. Also, if you have many IPs then having a fixed loan allows you to know exactly how much you are repaying on each property.
Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
Hi Vincenza,
It is important to do your research, no matter what you choose to invest your money in. In this situation, you should be taking into consideration areas where high growth is expected (capital gains potential), as well as looking for areas with high rental income and taking note of the area’s vacancy rates. The higher the vacancy rate normally indicates a less desirable area and could make the property difficult to sell in the future.
Buying a holiday home or in resort apartments always brings the risk of seasonal demand. You might receive great demand during the peak season, but for the whole financial year these returns may not average out to very much, especially if you have a slow season and low demand.
You should also bear in mind strata costs. If the complex you are looking at has a swimming pool or a gym for example this will push up these running costs. Wear and tear is also another issue, especially if you have lots of people renting out your apartment for short time periods.
Finally, there might be future developments proposed for the resort, and as a private investor, it might be likely that you will have to contribute to the upkeep as well, especially as a resort will want to remain attractive to appeal to its guests.
I’m not saying that investing in a resort is a bad idea, but you should be very wary and weigh up all the pros and cons to suit you.
Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
Hi Richard,
There is actually a huge difference between buying a property that is OTP and one that is completed.
If you buy OTP, you are not required to service a loan for 12-24 months. If you buy a property that is completed you need to service the loan straight away.
If you buy OTP, you can take advantage of Government Grants around the country, if you buy a property that is completed you can’t.
If you buy OTP in Victoria, you pay very little stamp duty, if you buy once completed you pay Australia’s highest rate of Stamp Duty.
If you buy OTP, you can select the best apartment in the building, if you buy once completed the chances are you won’t get the best selection to choose from, or any choice for that matter.
I could continue to go on but I think you acknowledge that there is a big difference between OTP and already built.
I’m not arguing against your point that buying completed stock is not a suitable option; I’m just saying every client is different with different strategies and different requirements.
As for my personal holdings, that’s a private matter surely? But yes they are made up of properties that were purchased OTP and completed.
With regard to your last sentence I hope you are not indicating I’m a liar… but just to prove my point. A selection of our clients wins in the last 18 months:
St Marys – Purchase Price: $315,000 Settlement Valuation by Bank $410,000
Arncliffe – Purchase Price: $560,000 Settlement Valuation by Bank $640,000
Homebush West – Purchase Price: $420,000 Signed contract to sell on settlement: $550,000
Liverpool – Purchase Price: $340,000. New project next door selling From $450,000
Harris Park – Purchase Price $480,000. Identical unit below sold at $550,000 at completionI could go on…
I’m not saying every OTP property is good and I’m not saying it would suit everyone but surely my point is made and you can acknowledge that there is room for an OTP strategy in the market.
Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
Hi Richard,
Buying properties Off the Plan has many advantages compared to buying established properties. Some of the main advantages include higher tax deductions and depreciation savings, reduced maintenance costs, higher rents due to many tenants preferring new property; long construction time allows for capital gains to occur whilst you are not paying a mortgage as well as these properties generally being well designed for today’s client and can be more energy efficient.
While these are advantages to the clients we deal with, OTP isn’t for everyone.
As I mentioned earlier, buying Off the Plan in Brisbane is a smart move right now due to Brisbane being in the upswing.
Myself, along with my staff have purchased OTP apartments in Brisbane, so our recommendation is backed by our personal commitment.
In regards to our fees we do get paid as a company by the developer, but our consultants get a flat fee to service the client and are not driven by commission incentives, but rather by happy clients that refer them more business.
Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
Hi simpanteli,
You are quite right in thinking that about the Sydney property market. At the moment property prices are quite inflated due to Sydney being at the peak of the property clock so it is hard to find an affordable property that will provide high growth and high rental returns.
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it is also important to do your own research as well, and it is not a necessity to go visit the area if your goal is solely to use this property as an investment. As long as the location is right (e.g. close to public transport, amenities, schools etc) and you have done your research then you are on to a winner. Also, Google maps and Google Earth makes it easy to get a general feel of the area, whilst you can also view what the property is like through images and floor plans.
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Mark Mendel (iBuyNew) | iBuyNew
https://www.ibuynew.com.au
Email Me | Phone MeYour partner in off the plan property
