landlords' newsletter november 2014
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Landlords' Newsletter November 2014TRANSCRIPT
In this edition: How long will it take for your property to rent? The Depreciation Difference – Which Method is Best for You? Will You Be Losing to Gain? – ‗Opportunity Cost‘ Explained! RTA Cracking Down on Unfair Bond Claims!
November 2014
A Selection of Properties Recently Leased Quote Another happy customer—Wow Moment Calendar of Events
Dear Landlord,
We hope you've had a great
month - for us, October has
been surprisingly busy thanks
to a higher university intake
than previous years and
students relocating from
interstate. With luck this trend
could continue into November
and leads us into a busier
December period!
With the warmer weather
Monthly updates and preparations
comes greater fire danger and
the need to ensure that your
property 's gut ters and
surround areas are clear of
debris to keep safe. If you
would prefer someone else to
do it for you (and who
wouldn't!) please contact the
team for a speedy quotation
from multiple companies at our
disposal.
For those of you with children
in the later part of their studies
we wish them all well over the
exam period - what a relief it
will be for them to have it over
and be free to embark on their
lives as young adults!
Speaking of celebrating… we
hope you get to enjoy the
Melbourne Cup. A vital event
on our office calendar - we're
already gearing up for a
couple of hours out of the
office to enjoy the fun!
Best Regards,
Christina and the team Chris,
Helen, Julie, Lisa & Haleigh
www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants
How long will it take for your property to rent?
That of course depends on the time of the year so here are the latest statistics for October.
BRISBANE STATISTICS The Market
Source: rentfind.com.au
The Depreciation
Difference – Which
Method is Best for You?
What is depreciation and how
can it be claimed?
The Australian Tax Office (ATO)
allows investment property
owners to claim depreciation due
to the wear and tear and decline
in value of a building and its
fixtures over time. Depreciation is
since this date, even those which
were completed by a previous
owner. For commercial properties
the date of eligibility differs.
Owners of any non residential
property can claim depreciation
on the structural element for
buildings in which construction
took place after the 20th of July
1982.
If an investment property was
built prior to these dates, the
owner is still able to claim the
a non cash deduction: this means
that investment property owners
do not need to spend any money
to be able to claim it.
Property investors often assume
they are not eligible to claim
depreciation as they believe it is
only available on newer proper-
ties. However, depreciation can
be claimed no matter what the
age of the property.
Owners can claim a capital works
deduction on the structural ele-
ment of a building for any
residential property in which
construction commenced after
the 15th of September 1987.
This includes the ability to make
a claim for any recent renova-
tions which have taken place
www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants
wear and tear of removable
items, described as plant and
equipment. Examples of plant
and equipment items include
carpets, tiles, a hot water service,
l ights and l ight f i t t ings,
microwaves, ovens, ceiling fans,
blinds, range hoods, furniture,
security systems, dryers and
exhaust fans. For a property
investor, claiming depreciation on
these items can result in
thousands of dol lars in
deductions, and therefore make a
huge difference to the cash
return resulting from owning the
property.
Two methods to claim
deductions
When an Accountant processes
a property investor‘s depreciation
claim as part of their tax return,
the investor can choose between
two different methods specified
by the ATO to claim the available
deductions. These methods are
called the diminishing value
method and prime cost methods.
By selecting the diminishing
value method, a property investor
claims greater depreciation
deductions over the first few
years of owning the property, the
deductions will then diminish over time. This method generally ap-
peals to property investors who want to increase their cash flow in the
early years of ownership. This may be because they want funds to help
pay off their loan faster or if they intend only on holding on to the prop-
erty for a short time.
The alternative prime cost method allows property investors to claim
constant depreciation deductions over a longer period of time. While
both methods yield the same total deductions, only one method can be
selected. It is recommended for property investors to discuss which
method is best suited to their situation with an Accountant and to
contact a specialist Quantity Surveyor who can complete a depreciation
schedule which provides the highest possible deductions for both of the
alternative methods.
The difference depreciation can make – a case study
The following scenario provides an example of how the owner of an
investment property purchased at $420,000 with a rental income of
$490 per week and a total rental income of $25,480 per annum,
benefits from claiming depreciation. In this example, the property owner
had expenses for the property such as interest, rates and management
fees totaling to $32,000.
www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants
This investor used property
depreciation to turn their negative
cash flow position into a positive
one. Without depreciation they
were paying out $79 per week.
By taking advantage of tax
legislation and making a
depreciation claim, the investor
was able to turn their loss to an
income of $3 per week. In total,
BMT Tax Depreciation saved this
investor a total of $4,255 in just
one year.
Request a depreciation
schedule
To gain the benefits of a
depreciation claim, property
investors are encouraged to
enlist the services of a specialist
Quantity Surveyor to complete a
tax depreciation schedule. This
schedule will outline all the
possible deductions available on
a specific property and is used by
the investor‘s Accountant when
preparing their tax return to make
the depreciation claim.
Quantity Surveyors are one of
the few professionals recognised
by the ATO to be able to provide
a tax depreciation schedule.
Enlisting a specialist Quantity
Surveyor who can provide an
itemised schedule containing all
plant and equipment items as
well as a schedule outlining
claims for the capital works
deductions available on the
buildings structure will ensure the
client receives the maximum
deductions available for the
property.
A well prepared schedule should
also contain a break down of
both prime cost and diminishing
value methods of depreciation,
allowing the client, on the advice
of their Accountant, to select the
best method by which to receive
their claim depending on their
personal investment strategy.
Article provided by BMT Tax
Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS,
MRICS) is the Managing Director of
B M T T a x D e p r e c i a t i o n .
Please contact 1300 728 726 or
visit www.bmtqs.com.au for an
Australia-wide service.
you‘d be wise to understand the
concept before even thinking
about purchasing.
Every time you do or do not buy,
you are potentially stopping
yourself from buying something
else. If that ―something else‖ is a
better investment, then you‘ve
missed that opportunity. That‘s
your ‗opportunity cost‘. It‘s the
‗cost‘ of money you could have
had by making a different choice.
Of course, hindsight is 20/20, and
there will likely always be a better
choice that could have been
made. There will always be
some degree of the unknown –
and the fact is, you can never
100% accurately know what the
cost of missing that opportunity
was. However, it is something
you should bear in mind
particularly when funds are
limited and the property you
purchase has a lot riding on it.
The point is, you want to be
comparing the possibilities to try
and make the best choice you
can with the information
available.
You can consider ‗opportunity
cost‘ alike to ‗missed opportuni-
ties‘. Not all of them are
Will You Be Losing to
Gain? – ‘Opportunity
Cost’ Explained!
‗Opportunity cost‘ is a buzz
phrase when it comes to property
and investing generally, and
www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants
investments others consider
unwise, not everyone has this
luxury.
For each person opportunity cost
looks different as not everyone is
able to seize every opportunity.
For instance, those with plenty in
the bank and with high
serviceability may not miss out
on a rare purchase if some cash
is tied up in a property that hasn‘t
seen any equity growth.
However, someone else may
need to step away from that
dwelling due to having no funds
left or hitting a serviceability wall.
It doesn‘t just relate to property
either. Any investment, of your
money or your time or another
resource, can be seen as
opportunity cost. It‘s a regularly
used term in economics as well.
HOW CAN YOU AVOID
OPPORTUNITY COST?
There are, sadly, no hard and
fast rules. However, there are
several things you can do with
e v e r y p u r c h a s e y o u ‘ r e
considering to determine what
the outcome may be.
TAKE A STEP BACK AND
THINK UNEMOTIONALLY
particularly measurable. You also
don‘t want to be beating yourself
up over missed opportunities, but
do learn from past mistakes if,
indeed, you should have known
better.
RentCover‘s, Sharon Fox-Slater,
put ‗opportunity cost‘ as the
number one risk first-time buyers
need to overcome.
"Property investment can be
financially rewarding but it‘s
usually negatively geared, at
least to begin with, reducing your
opportunity to invest in other
asset classes or different
properties," she said.
"Can you argue the merits of a
property you are considering
buying over others in the
marketplace and over other types
of investment?"
Opportunity cost is also worth
thinking about when it comes to
tying your money up for a period
of time – such as in an off the
plan property, or in a block of
land that doesn‘t provide you any
rental return and has uncertain
growth. While some people can
afford to speculate on certain
properties, or to put money into
ABOUT THE PURCHASE
Ask yourself – why am I
considering this property? What
is the purpose of it? How does it
fit into my portfolio?
UNDERSTAND HOW IT IS
LIKELY TO PERFORM AND
WHY
If you‘re looking for a growth
asset, and this is a high yielding
property in an area said to have
slow growth, then you might want
to re-think your purchase. Make
sure you know what performance
is expected (this is where
research and expert advice can
be useful).
CONSIDER THE IMPLICATIONS
FOR IF THE PROPERTY
UNDERPERFORMS
It‘s always likely that a property
will not perform to your best
expectations. Know what the
worst case scenario is and how
this will affect you. If you can‘t
find a tenant, or it doesn‘t grow in
value, what will this do to your
finances? Knowing this will help
you plan and mitigate the risks as
well as assess how likely these
things are to occur.
HOW DOES IT COMPARE?
Comparing your property to
Under current laws, any person
registered on the bond can make
a claim on the bond. While the
RTA encourages everyone to
agree and sign the form, the law
only requires 1 signature, putting
the onus on the other party to
dispute the claim if they do not
agree.
"This type of behaviour is very
disappointing," RTA CEO David
Eades said.
"If the tenants had not lodged a
Form 16 they may have lost their
full bond giving the property
manager and owner the tenants‘
rightful money."
Mr Eades said the RTA had been
monitoring the issue for some
months. "While the vast majority
of property managers and
owners do the right thing, there
are a small number of people
who are making a full claim for
the bond when they may only be
others within your price range, as
well as comparing it to what will
happen if you do not purchase at
all, is an important part of
reasoning out the investment. If
you are in a better financial
situation in the long run, when
considering potential growth and
outgoings, then it may be worth
asking yourself why you‘re
buying this particular property.
Source: Property Observer – 29
September 2014
www.propertyrentalsbrisbane.com FREE Information Guide For Landlords & Tenants
entitled to a small portion," he
said.
"The Residential Tenancies and
Rooming Accommodation Act
2008 was designed to balance
the rights of both owners and
tenants to make renting fair for
everyone. This type of behaviour
is against the spirit of these
laws."
Mr Eades said the RTA would
continue to monitor the issue and
educate owners and agents who
regularly make a full claim for a
bond.
Understand your rights and
responsibilities by contacting the
RTA or learn more on how to
properly claim a bond refund.
Fast facts:
238,477 bond refunds in 2013/14
financial year
72.8 per cent refunded to tenants
in full
13,911 bonds disputed
Source: RTA – September 2014
RTA Cracking Down on
Unfair Bond Claims!
The RTA is urging property
managers and owners not to
make unnecessary claims for the
full rental bond.A recent dispute
resolution case involved a
property manager who made a
claim for the $2,000 bond, citing
‗money for repairs‘ as the reason
for the full claim.
The tenants did not agree they
owed $2,000 for repairs and
lodged a Dispute resolution
request (Form 16) with the RTA.
During conciliation the agent
agreed the actual cost for repairs
was just $50 and the tenant was
entitled to a $1,950 bond refund.
4 November Melbourne Cup Day 14 November G20 Summit Holiday 17 November Mid Month Accounting 1 December End of Month Accounting
A Selection of Properties Recently Leased
Cannon Hill Townhouse $520 p.w.
3 bed, 2 bath, 1 car accommodation
Quote
"The longer I live, the more beautiful life becomes."
—Frank Lloyd Wright
Indooroopilly House $865 p.w.
4 bed, 3 bath, 2 car accommodation
RE/MAX Profile Real Estate 141 Boundary Road TEL 07 3510 5222 FAX 07 3876 5544
www.profilerealestate.com.au Bardon QLD 4065 Chris [email protected]
www.propertyrentalsbrisbane.com PO Box 388, Paddington, 4064 Helen [email protected]
Julie [email protected]
Errors & Omissions: These details have been prepared by us on information we have obtained and while we trust it to be correct, is not guaranteed by us and you should rely on your own enquiries.
Spring Hill House $1,750 p.w.
5 bed, 3 bath, 2 car accommodation
Calendar of Events
Hello Helen, I just wanted to thank you for your efforts managing the property. It has been very smooth since you took over. It is an amazing contrast to the previous situation. Thank you, Justin
Another happy customer—Wow Moment