Tag Archives: looking to invest

Why should millennials jump into the investment property market?

Why should millennials jump into the investment property market?In today’s market, there are all sorts of people who seek to buy a home for investment purposes. According to Digital Finance Analytics’ 2015 Household Survey, just under one million households own investment property without building any kind of portfolio, while 178,000 households have a collection of investment properties.

These range from people in their 40s and 50s pondering their retirement strategy, to young professionals trying to get a foot in the market early.

With this in mind, some interesting research has recently turned up on the behaviour of the millennials, which may highlight the need for them to invest into real estate.

Millennial Falcon

People generally branded as millennials are those born sometime between 1980 and 2000, and seem to hold different values and objectives to the generations that came before.

Deloitte’s millennial Survey of 2016 revealed that this group of people tend to be far less attached to traditional career-based goals and more on personal development. Just under half of the millennials surveyed expect to change workplaces within two years. Simultaneously, roughly one in five actually intend to stay with their present employer for more than five years.

So, what does this all mean? As David Hill, chief operating officer from Deloitte Australia, suggested, millennials are more independent and more assertive of what they seek, wanting their work to have purpose beyond turning a profit. They are also unafraid to simply seek employment elsewhere until they find a fulfilling line of work.

Plan B

If you’re a millennial yourself and share this sense of free-spiritedness, you may just benefit from buying real estate for investment purposes. It’s likely that this sense of personal independence may not disappear as the decades roll by, and it’s important to have financial backing in the instance that you choose to drop jobs to pursue another passion.

Investment real estate is a practical solution, providing you with a secondary stream of income when your cash flow is erratic or you simply need extra cash to pay the bills.

Furthermore, having a valuable asset that only really goes up in value over time is a great parachute to pull in time of financial need. CoreLogic RP Data’s most recent Market and Housing Update shows that the median price of Australian property was $600,000 by January – a result of a market that, aside from a few slight dips, have only really trended upwards since 1998. This means that investing early could earn you that sweet pay out later down the line if you want to move in a completely different life direction.

Just get in touch with First National Burnie to see how we can turn those dreams into reality.

Building more value, depreciation and new houses

Building more value, depreciation and new housesChoosing to build a brand new home rather than buy an existing property provides a number of benefits for potential investors.

Generally these types of properties will be built in a developing suburb close in proximity to schools, transport and local services. Surrounded by other new homes, a new house is likely to have street appeal that will attract potential tenants and as a result provide excellent weekly rental returns for the property owner.

One benefit that often goes unconsidered by potential investors when investing in property however is the depreciation benefits available.

According to the Chief Executive Officer of BMT Tax Depreciation, Bradley Beer, research suggests that 80% of investors don’t maximise the depreciation deductions available from their properties.

Considered a non-cash deduction, investors don’t need to spend any money to be able to claim depreciation from their property. It is a deduction available for any wear and tear which occurs to the building structure and the plant and equipment assets contained in the property over time.

Depreciation relating to the building structure is claimed as a capital works deduction. Examples of items which can be claimed as capital works deductions include the walls, windows, doors and the roof of the property. Capital works deductions can be claimed at a rate of 2.5 per cent per year over forty years for properties in which construction commenced after the 15th of September 1987.

Plant and equipment depreciation on the other hand relates to the assets which can be easily removed from the property such as carpets, blinds, ovens, dishwashers, garbage bins and even shower curtains. These items depreciate based on an individual effective life as provided in legislation from the Australian Taxation Office.

While the owner of any income producing property is eligible to claim depreciation, those considering building a brand new property for investment purposes will usually receive higher depreciation deductions. There are two main reasons for this:

  • The owner of a brand new property will be eligible to claim the full deduction for the entire cost of the building structure over forty years. Owners of properties which are not brand new can only claim the remaining years available.
  • New houses usually contain plant and equipment assets which are higher in value. This increases the depreciation deductions which will be available for the owner.

Let’s take a look at some of the depreciation deductions the owner of a freshly built brand new house can expect to claim over the first five years of ownership.

depreciation deductions the owner of a freshly built brand new house

As the table shows, the owner of a newly built house can claim between $8,300 and $10,700 in depreciation deductions in the first full financial year alone. Over five years, this cumulates to between $32,500 and $42,800 in deductions the owner can claim as a tax deduction.

Based on a tax rate of 37 per cent, investors will receive an average annual cash return of between $2,405 and $3,167 from a newly built house depending on its size and the assets contained.

Those considering building a brand new house for the purposes of an investment are recommended to seek advice from a specialist Quantity Surveyor prior to purchase.

A Quantity Surveyor, such as BMT Tax Depreciation, can provide a detailed depreciation estimate outlining the deductions that will be available once the property is property is constructed and available for rent. This estimate can help investors to crunch the numbers to get a more accurate picture of their after tax scenario to help them with their investment decision.

Once a property has been built, in order to claim depreciation a Quantity Surveyor should complete a tax depreciation schedule outlining all of the deductions available for the owner. This schedule can then be used by the property owner’s Accountant to process their claim when they complete their annual income tax assessment.

For a detailed estimate of the depreciation deductions available for any property, contact BMT Tax Depreciation on 1300 728 726 to speak with one of their expert staff or visit click here to request a quote.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.

Depreciation for renovations made easy

BMT-logoInvestment property owners often miss out on thousands of dollars due to two main reasons:

  1. They don’t know what depreciation entitlements they can claim for renovations or refurbishments to their investment property
  2. They don’t use a qualified Quantity Surveyor to prepare a tax depreciation schedule

Follow the steps below to ensure your tax depreciation schedule is right the first time around.

Understand scrapping

Scrapping refers to the removal and disposal of any potentially depreciable asset from an investment property. When worn or old assets (like carpet and hot water systems) are replaced and scrapped, the owner of the property may be entitled to claim the remaining depreciable value for the items being removed as a tax deduction in that financial year.

Get a “before renovation” tax depreciation schedule

Arranging a tax depreciation schedule before completing renovations will save you time and money when making a claim. In case of an audit by the Australian Taxation Office (ATO), a valuation of all items in a property, as well as adequate photographic records is required.

Get an “after renovation” tax depreciation schedule

A second schedule is prepared after completion of the renovation, identifying the value of all new plant and equipment and capital expenditure within the property. The adjustments will be made to your tax depreciation schedule for a small adjustment fee and should not cost you as much as the initial tax depreciation schedule. The new schedule will outline all the depreciation claims available for the life of the property (forty years).

Only deal with a credible provider of tax depreciation schedules

With over sixteen years of Quantity Surveying expertise, BMT Tax Depreciation is the leader in providing ATO compliant and comprehensive tax depreciation schedules to property investors Australia-wide.  At BMT, our qualified team of Quantity Surveyors meticulously prepare and customise each and every BMT Tax Depreciation Schedule, ensuring you claim everything you are entitled to.

Scrapping is a complicated process that requires the expertise of a specialist Quantity Surveyor in conjunction with an Accountant. By requesting a tax depreciation schedule you know you’re not going to miss out on anything and your Accountant will love you for it.

To learn more about property depreciation, or to arrange a tax depreciation schedule for your investment property, visit the BMT Tax Depreciation Schedule page on their website here.  You can also contact one of BMT’s expert staff for obligation free advice on 1300 728 726.

Article Provided by BMT Tax Depreciation.