JUST RESULTS PROPERTY
5 WAYS TO SAVE YOUR WAY TO HIGHER YIELDS!
When buying an investment property sometimes investors can fall into the trap of being over excited about NEGATIVE gearing. Negative gearing can be a method which is motivated by off setting tax so effectively you will get a return. There is always the assumption the property will increase in value so when the day comes you want to sell, you will make capital gain. You can still make this capital gain with out being excited about digging in to your pocket for 7-10 years, which can affect your lifestyle greatly for the period with the hope that you will see a return. In this E-Book we would like you to show you how to treat your investment property like a business where you are solely focused on the bottom line. If you can minimize your expenses you can essentially increase your profits. So instead of taking to a loss by saying ”it is all good as it is a tax deduction” lets minimize your loss, to increase your profits to leverage into the next property purchase.
TABLE OF CONTENTS Get depreciated...................... ...................................1 We are surounded by water and yet it costs me a fortune !...............................................................2 Managing vacancy around peak seasons to avoid NOcember !.......................................................3 I will wait as long as it takes to get the rent I want !..............................................................................4 Where do I spend and where do I not ?...........5
GET DEPRECIATED With any property less than 10-15 years old, is renovated or you have completed your own improvements on deserves to be depreciated. What is depreciation? WIKIPEDIA STATES In accountancy, depreciation refers to two aspects of the same concept: 1. the decrease in value of assets (fair value depreciation), and 2. the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle). In a quick sentence it means that if you have a property which is new or renovated the property will be worth less as it is being used so you can be compensated for this loss in the way of a tax deduction. This can easily be done by the way of a Depreciation Schedule. The average cost of this report is between $450-$750 and will last up to 7 years. If you divide the cost by 7 years it would be approx. $90 per year as an expense. On a brand new property it will take somewhere between $13,500 to $25,000 o your taxable income in your ďŹ rst year. This is something your Investment Manager should have a complete understanding of and make the suggestion where it suits.
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WE ARE SURROUNDED BY WATER AND YET IT COSTS ME A FORTUNE! It does cost a fortune, and the forecast does not appear look to be changing anytime soon, so you should do something about it now! With houses and strata titled properties you can actually pass the cost of water used onto your tenant however many investors do not know this fact. Should you be provided professional advice on how to make your Investment Water efficient would you not do it. THE RTA STATES YOU CAN PASS ON YOUR WATER BILL IF WATER EFFICIENT DEVICES
MINIMUM WATER EFFICIENT STANDARD REQUIRED
Internal cold water taps and single mixer taps (excluding bathtub taps and taps for appliances)
A maximum flow rate of 9 litres per minute
Showerheads
A maximum flow rate of 9 litres per minute
Toilets
A dual flush function not exceeding 6.5 litres on full flush and 3.5 litres on half flush and a maximum average flush volume of 4 litres (based on the average of 1 full flush and 4 half flushes)
If your property does not automatically fit these requirements a lot of the time it is a simple fix where your average plumber can for a small cost get the property compliant. Once your property is compliant you can say GOODBYE to water bills!
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MANAGING VACANCY AROUND PEAK SEASONS TO AVOID NOCEMBER! An investment property sitting VACANT can be a massive cost and yet it can be avoided. As soon as your property is vacant it is a huge cost as you are having to dig up for the mortgage payment all by yourself. The rental market can have peaks and troughs yearly tand are contributed by overall market factors like supply and demand. We are not talking here about these factors we are talking about a period to avoid a lease ending in NOCEMBER! Thinking like an Investor means combining November and December into one month called NOcember. This is the month you want to avoid any leases ending like the plague. January is traditionally a peak season so you will achieve a higher rent so ďŹ nishing a lease in this period will minimize all damage from NOcember. 7-month lease, 9-month lease it does not matter as long as it does not land in NOcember!
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I WILL WAIT AS LONG AS IT TAKES TO GET THE RENT I WANT! When there is an over supply of tenants and not many properties to rent this is the time to see your shot and take it. When the market has softened and you decide to put the rent up when you have a great tenant paying on time at the risk of losing them will actually cost you money. It is better to have no week’s vacancy and the rent coming in than having a tenant leave to try to get an extra $20 per week. This information should be a given however sadly it is not tracked and advised on correctly in most situations. See the quick example below to hammer home that sometimes increasing can cost you. Property currently rented at $420/wk and market softens. Lease is due to expire on the 1st November. Over the 6 month period after the 1st of November where: Investor A asks for no increase receives $10,920. Investor B puts the rent up from $420/wk to $440/k. The property sits vacant for 2 weeks so they bring it down to $430/wk after 4 weeks and secure a tenant on 1st December. 6 months after their original lease would have ended they have only collected $9,460. $1,460 down the drain to achieve $10 a week more. An increase does not always mean an increase in what you get in your pocket!
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WHERE DO I SPEND AND WHERE DO I NOT? When renting out a property for the first time there are some things that you want to spend on and some things that you do not. There are improvements and then there is maintenance. When first putting a property to the market you want to make sure it is fresh and everything is working to attract a quality tenant. So many times we see a tenant go into a property when the owner has done the ground work do they stay and become a long term tenant who cares for the property like it is their own. On the other hand when they move in to a below average property does it deteriorate further and the tenant takes a less than affectionate approach to looking after the property. It is a combination of the 2 which creates an outcome less than desirable for all parties involved. Our suggestion is to spend on what is required to make the property feel right for a tenant that they will want to stay and care for the property which will save you money in the long run on unnecessary damages. We do not suggest improving things that do not need it. If it is not broke do not fix it. If properties in the area have brand new kitchens are achieving $15-$20 more in rent an your cost for a new kitchen is $12,000 do the math. That is 600 weeks to pay off your kitchen. Yes you may get some depreciation from, it all we are saying is do your numbers!
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Choosing an agency to manage your property that understands these 5 points can make a huge dierence on your bottom line. Talk to the team at Just Results Property as we have 30+ years experience investing in residential property so we can show you how to make your property work for you. Thanks so much for reading our short E-Book.
Our website:
www.justresultsproperty.com.au 07 3420 5468