Posts Tagged ‘Property Repair’

Failure to maintain a rental property can have serious consequences if a tenant is injured

 The Residential Tenancies Act clearly states that the landlord must maintain the property in ‘good’ repair, in a state that is fit to live in and in a state that complies with health and safety codes, local government by-laws and supply authority regulations.

 These tenancy laws have been written to protect individuals from injury and poor living standards.

As a managing agent it is our duty of care to ensure that the property is in good repair and safe for the tenant.

If a member of our property management team recommends improvements, maintenance or repairs at your property, it is to protect your investment.

The following are examples of high risk repair areas that could lead to tenant injury:

•  Steps and railings that are not secure or have white ant activity or dry rot;
• Electrical points and wiring that are loose, frayed or not working;
• Floor coverings that have tears, loose threads or ripples;
• Broken or insufficient external lighting;
• Faulty electrical appliances;
• Uneven or loose pavers;
• Roof leaks;
• Windows or doors with faulty locks;
• Broken smoke alarms;
• Faulty pool gate locks or fencing;

Our office carries out regular routine inspections to ensure that the property is kept in a safe, well- maintained condition.

If a member of our team reports repairs, maintenance or improvements it is important that you work with us to ensure that it is rectified in a timely manner.

 A well-maintained property will maximise the rent achievable, attract a quality tenant, reduce vacancy periods and improve the long-term capital asset value of the property.

 Our office highly recommends that you organise the following inspections to ensure that your property is safe:

• Building inspection
• Pest inspection
• Electrical inspection
• Pool inspection (if applicable)


 

 This article is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agents and Glenelg Property Management Experts

A common problem for Landlords and Property Investors is to determine the difference between ‘fair wear and tear’ and malicous property damage caused by a tenant.

Watch this video and discover the difference…

This blog post is brought to you by Raine & Horne Glenelg  your Glenelg Real Eatate Agents and Glenelg Property Management Experts.

 Angus Raine, CEO of Raine & Horne, says almost 50% of landlords will miss out on potentially thousands of dollars by failing to claim depreciation on their investment properties before June 30.

He notes, “Many property investors either don’t maintain an accurate depreciation schedule or have a schedule that is out-of-date.” A depreciation schedule shows depreciable assets such as carpets, blinds, curtains, air-conditioning, fire alarms systems, light fittings and hot water units.

Angus explains, “Landlords can claim up to 12% on depreciable assets and also in many cases 2.5% of the building cost (not the value) of residential properties built on or after 18 July 1985. Depreciation can also be claimed on the cost of improvements made after 26 February 1992 to older properties.”

It’s worth remembering that the cost of a depreciation schedule is also tax deductible. Landlords can expect to pay between $650 and $700 for a depreciation schedule. But get a schedule before June 30 and it can be used to minimise your tax this financial year.

Peter Bembrick, a tax partner with accounting firm HLB Mann Judd Sydney says many landlords are also failing to maximise their full depreciation entitlements. “Often investors depreciate expenses such as carpets, light fittings and blinds, but fail to depreciate property owned by the body corporate that they have a part share in.”

Pre-June 30 tax tips for landlords

1.       Claim all deductions and depreciation prior to June 30.

2.       If you don’t have a depreciation schedule, consider getting one – they are tax deductible and can trim thousands of dollars from your 2008/09 tax bill.

3.       Prepay up to 12 months interest in advance on an investment property mortgage and claim a tax deduction for 2008/09.

4.       Where possible, time a property sale for after June 30 to avoid triggering a capital gains tax liability this financial year as personal tax rates will fall from 1 July 2009.

 

 

 

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

 

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The Australian Taxation Office (ATO) differentiates between repairs and improvements. To ensure the best results are obtained from an investment property, it is important that you understand the difference between the two claim options.

Deductible Repair: Returning items or property to their original state; an exercise in retaining the value of the item or property. Repairs attract an immediate 100% deduction in the year of expense.

Improvement: Improving the condition of an item or property beyond that of when it was purchased. Improvements are capital in nature and as such, must be depreciated over time.

When determining whether a repair or improvement has been made, often three basic tests are employed. They are:

1. Has the condition of the property been improved beyond the original condition at the time of purchase? When an item was partially or fully replaced, it needs to be determined whether it was done due to the item being damaged, or done to improve what was previously there.

2. Has the property been established as an income producing property? The ATO states that repairs must relate directly to the wear and tear or other damage that occurred as a result of renting out the property.

3. Was the asset partially replaced, or replaced in its entirety? Partially replacing an item, like a fence panel, due to damage or wear and tear, often implies that a repair is being carried out. However, if a fence panel needs to he replaced, but the property owner decides to replace the entire fence (for no apparent reason except to improve the property’s value), this will he classified as an improvement.

Important Points

When completing repairs, they should be carried out when the property is tenanted. The ATO will allow repairs as a deduction only if the property is being used for income producing purposes at that time. However, if tenants have recently moved out and repairs need to be made due to damage caused by those tenants, the repairs will also be allowed as a deduction as the damage occurred when the property was income producing. It is also important to consult your accountant when making a repair claim, as it becomes a 100% immediate deduction.

It is important to note that an initial improvement at the time of purchase will not give rise to an immediate tax deduction. Property investors may be able to claim the cost of an initial improvement under the special construction write-off provision, or create a plant or article which may be depreciated over time, but it wilt not create an immediate deduction in its own right.

At Raine & Horne we facilitate a range of professional services to unlock cash flow for our Landlords. If you are a Landlord, it is important that you get professional advice before you make any improvements to your investment property.

Call Raine & Horne Glenelg today on 8376 8844 to find out how we can help you maximize your depreciation deductions from an investment property.

This article was brought to you by BMT Quantity Surveyors in association with Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

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Overall, Australians are now collectively spending millions of dollars every week on home renovations.

 

Raine & Horne Glenelg has produced this article to outlines some of the key issues to consider before you renovate your home. This report is based on the large wealth of experience that Raine & Horne has amassed through dealings with owners who have decided to buy a home for renovation purposes or sold a recently renovated property.

 

Common Mistakes Made By Home Renovators.

 

Mistake #1 – Getting Emotionally Involved

Many homeowners undertake a home renovation for emotional reasons. Very often they fall ‘in love’ with the property. This emotional issue applies to both home owners and investors. One of the biggest mistakes homeowners make when undertaking a home renovation is to overcapitalise their property.

 

Mistake #2 – Failing to Understand the Meaning of Overcapitalisation

According to the Royal Australian Institute of Architects; many homeowners are paying thousands of dollars only to devalue their homes. One of the ways they do this is by overcapitalising which means to improve a property beyond its resale value. Overcapitalisation means you spend too much money on the property and are not be able to recoup these monies if you decide to sell it. A simple example would be if a homeowner spends $150,000 on home renovations and then decides to sell the property. The homeowner may find that the value of the property has only increased by $75,000 meaning that they have effectively lost $75,000 through the renovations. In effect, they have over-capitalised the property by $75,000.

 

Mistake #3 – Not Doing Your Homework on Comparable Market Pricing

Unfortunately, it is important to recognise that most suburbs have a median sale price and an upper sale threshold specific to your suburb. Even different streets in your suburb have different price thresholds; that’s because your neighbour’s houses and the general streetscape have considerable influence on the value of homes in your street. Before renovating it is important to consider the housing styles, demographics of your suburb, and sale prices achieved of other homes in the area that have recently sold.

  
Mistake #4 – Under-Estimating all of the Costs Involved in Building

This is one of the biggest mistakes that homeowners make when renovating their homes. Homeowners typically under-estimate the costs involved in building. Such as; demolition costs, professional fees, contingencies for variations, foundation changes due to soil conditions, fit-out and landscaping, kitchens and bathrooms, escalation of building costs and delay and acceleration costs to finish the project on time.

 

Mistake #5 – Poor Selection of a Builder

Property owners who decide to employ a builder to undertake home extensions also encounter problems because they have not undertaken sufficient research on the experience of the builder, and their past record in undertaking renovations. Especially their “variation claims” history, often Builders locks unsuspecting homeowners into building contracts which cost homeowners thousands in variation costs. Another common mistake is to let the Builder provide the design, and therefore restrict the homeowner from getting competitive quotations upon the Builders design.

 

Mistake #6 – Doing it DIY to Save Money

Some people also make the mistake of trying to undertake home renovations themselves. This can prove costly in time and is financially unwise because a poor standard of work will only devalue the property. Character homes, in particular, require a higher standard of renovation work and you may need to carefully select tradesmen with past experience in this area to ensure that the work is properly completed. If you decide on a major renovation don’t cut corners doing it yourself. There is no such thing as a cheap renovation. Ultimately, it will impact on the resale value of the property or you will spend more funds at a later date to fix the original faulty work. Always seek competent, professional advice and trades people before undertaking a major renovation.

 

 

Mistake #7 – Failing to Stick to a Budget

A common problem is that home renovators do not operate with a strict budget and are unable to complete planned renovations because of a lack of money. This mistake results in homeowners financially overextending themselves through a lack of financial planning. The “Catch 22” is that renovators often can’t then sell their ‘half completed’ renovation and end up in severe financial hardship.

 

Mistake #8 – Poor Functional Design Layout and Design

A very common problem is that home renovators end up spending too much on a poor functional layout because of the limitations of the existing building. In many cases the homeowner would have been better off, to have demolished the existing house and start all over again. Another common problem is where the style of the renovation is inconsistent with the rest of the house; you’ll often see houses for sale with a modern extension that clash with the rest of the house which is still stuck in the 1970’s. These properties are “lemons” on the market and typically homeowners lose money on these renovations.

 

Mistake #9 – Spending Money on the Wrong Things

If you are living in $100,000 house you will not get a good return on an investment in a $35,000 bathroom. Swimming pools are a good example of additions to a property that often doesn’t add value. Many buyers do not want the work, expense, and potential for accidents that come with a pool. The general rule is that you should not spend more than 25 per cent of the value of your home on home improvement renovations.

 

Mistake #10 – Underestimating the Disruption to Your Lifestyle

Undergoing a major renovation and living through it, is often overlooked by most homeowners. The disruption to your lifestyle, the mess, the noise and restrictions is something that should not be discounted. If you are having major renovation (especially if you are a family with young children) consider moving out and renting elsewhere during the construction phase.

 

Before you make the decision to renovate or buy a new house, carefully ask yourself the following questions.

 

1. Decide what it is you are looking for in a final result and ask yourself if it will be cheaper to buy a different home or to renovate your old one.

 

2. What is the average selling price of homes in your area?

 

3. Will renovations alter the appearance of your home so that it appears out of place in the neighbourhood? Check the styles of other homes in the area. Keep in mind it might be a better idea to match or keep in step with the styles of other homes in the area. A poor design could devalue your home by thousands of dollars.

 

4. How much will renovations cost compared to what you paid for your home. What is the expected increase in value as a result of the renovations? Will the renovations actually cause your home to lose value?

 

The decision to buy a new home or to renovate is not one to be taken lightly. It is recommended that you think through every aspect of the project prior to getting started. Seek the advice of a local professional architect/building designer as well as a real estate professional if necessary to determine how the proposed renovations will affect the value of your home.

This article was written by Gary Pemmelaar. Gary is a Co-Principal of Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Property Management Experts – We’ll look after You.

Gary is a Civil Engineer, and hold a Builders Licence in SA. He has considerable experience in both Property Develoment and Renovations. To read more see Gary in a recent article The Adelaide Advertiser run abou Gary.

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