landlords' newsletter november 2014

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


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.


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


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


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.


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.


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

landlords' newsletter november 2014

Documents

residential property

investment property

property investors

depreciation difference

property s gut ters

office calendar

free information guide

landlords tenants