I am looking at buying a property in a area I am pretty sure there is going to be very sold capital growth over the next 5 years. There is no chance of buying Cash Flow Positive, so I am going the small cash flow negative to make it happen and take the risk.
I am looking at a purchase of around $400,000 for a brick house that is about 20 years old. The block size is what is appealing… as well as the increasing demand for nice tidy rentals in the area.
My plan is to
- render and paint the outside
- put in new kitchen bench tops, handles and taps etc
- put in new shower, paint the bathroom, and put in new fittings
My question is with regard to depreciation and having a Quantity Surveyor look at the property.
1.Is it worth while getting a Quantity Surveyor to look at the property for a depreciation schedule?
2. Are there any opinions out there in forum land as to what an approximate schedule would look like?
Any suggestions would be most helpful.Thanks
Quantity Surveyor is good value for money……….money for jam. Give Washingtonbrown Surveyors a call on 1300990612 or http://www.washingtonbrown.com.au, they will send you a schedule. Goodluck with your findings.
Worth the money. Do it.
You may be able to look at a sample on one of the Qs's websites, but they are basically columns and numbers.
Thanks blueheeler and LA Aussie
Any chance at getting your best guess at what the depreciation figure might be? Maybe a "from this" "to this" number?
I have absolutly no idea …. and I cant really the the report done until I own the property. Your best educated guess would really help me crunch some numbers.
Thanks again
It will all depend upon how much of the work is 'repairs and maintenance' & how much is 'replacement'. R&M is expensed, replacement must be depreciated.
Talk to your accountant before you spend a cent. It may pay to wait 12 months before doing any significant work in order to gain maximum depreciation. I just paid $450 (tax deductible) for a schedule and it was certainly worth it. Its impossible to answer your $ question as each house is different and has had varying levels of improvements. I read somewhere carpet/vinyl is deductible however polishing floor boards isn't? We went for the rental grade carpet, looks great. good luck…
Just to add to the above, if you undertake work BEFORE you start getting rent, then you must capitalise the works (ie it is obvious that you have bought a depreciated asset needing replacement), if you do the work after the first tenant leaves, no question about it R&M and some capital works.
You will however need to weigh up wether spending $3-5k on these works (and depreciating them) in return for a better rent ie extra $20-30 pw is better than waiting until the change of tenant to carry out these works. You may prefer to hit some now, to get the addit rent and some later for the R&M.
I think depreciation items and building is depreciatiable at 2.5% but it all depends on the circumstances etc. If you were to repair and maintain your investment make sure you do this with a tenant. Some things are tax deductible, dont over do it thou. Just to confirm what I've said, talk to a savvy accountant who has property investments.
I really must frequent this forum more often.
mrtender, from your description of the work you are doing, it's all 'building' i.e. depreciable at 2.5%. So if you spend $20,000, that's $500 per year.If when you reno the kitchen, you replace the appliances, there will be higher depreciation in them.
Also, you mention the house is around 20 years old. Remember, if it's built after July 85, you can depreciate the building.
And of course, there will be the Assets in the place that you aren't touching: floor coverings, curtains/blinds, HWS etc.
Scott
Hi,
on the topic of of depreciation. I hear ppl say quantity survey a property, does this apply to units as well?
Cheers
JeremyYes definately Jeremy.
Richard Taylor | Australia's leading private lender
Hi – just joined the forum – but I used http://www.corpred.com.au – and it was great value. I knew all my info, had photos and floor plans so I did the budget option of $250 + GST. Filled out the online checklist and then got a full schedule emailed to me within 48 hours. It was great
You must be logged in to reply to this topic. If you don't have an account, you can register here.
