A Property Investor’s Guide To Depreciation
Every smart property investor knows that to create and maintain a portfolio, we need to have good cash flow. One of the ways we can support this is by using depreciation and tax.
But, just like equity, depreciation only works for us if we know how to access and then leverage it.
Like all things tax, depreciation can be a tricky concept to grasp. But, once you get your head around it, depreciation can make a significant impact on the quality of your cash flow.
WHAT IS DEPRECIATION?
In terms of property investment, when we talk about depreciation, we are talking about a reduction in the value of an asset ie how much it is worth now, vs what it was worth when you bought it.
For investors depreciation does not simply account for a reduction in property value, but can also be used against fixtures, fittings, furniture and other items pertaining to the property.
WHY IS DEPRECIATION IMPORTANT FOR PROPERTY INVESTORS?
While adding up how much you’ve “lost” in value of an asset sounds like a bad thing, when it comes to depreciation, it’s the opposite.
The markdown of assets does not mean you have lost that amount of cash, or that the item is less useful. Simply put, it is that the item is simply valued as less on paper.
An example might be a carpet that was worth, on paper, $3000, and 12 months later it’s now worth $2500. That’s a negative loss of $500 on paper, which you can claim in tax.
WHAT CAN INVESTORS CLAIM DEPRECIATION TAX ON?
- Structural buildings
- Any items permanently fixed to the property
- Equipment including ovens, dishwashers, etc
- Fittings including blinds, carpets, ceiling fans etc
…and thousands of more items!
WHEN TO CLAIM DEPRECIATION TAX?
If you are paying tax in small, regular increments, you should also be claiming your deductions as you go via a PAYG variation.
Why wait a whole year to claim cash that belongs to you, when you can claim at regular times and use that cash to bump up your cash flow?
Any good accountant should be able to find out if you are eligible for this and set it up for you. Or talk to the experts at TRC-Gorod who can walk you through the process.
GET INVESTOR SAVVY
Using depreciation as a way to help with cashflow is just one of the strategies you can use as an investor, but there are many MANY more.
You only know what you know so why not learn more at one of our free property investing seminars.
Here you’ll learn many of the tactics great investors use to grow a budding portfolio and create long-lasting wealth well into retirement.
Book your spot now and find out what you need to know about the current market landscape and how you can make it work for the ultimate wealth creation opportunities.
Recent Articles
The Equity Tactic For Excelling Your Property Portfolio
While long term we know that cash flow is dependent on a good rental income, capital growth is the quickest way our property can pay us back. This comes down to having some smart tactics to get the most out of every dollar of value in our investment properties – something we like to call equity lock.
Are You at Risk of Losing Millions?
Considering that all major Australian cities are coastal, and most of the richest neighbourhoods are beachside, the growing threat of severe weather incidents due to global warming throws a serious spanner in the works when considering where to buy and invest. If you’re a climate change sceptic, we’re not here to judge. But that position isn’t going to help you if the institutions you rely on to protect your assets won’t have a bar of your $3 million beachfront house.
The Best Home Loan for Property Investors
Deciding on the right loan structure as a property investor, is a little bit like choosing the right outfit on a first date. It depends on what stage of life you’re at! If you’re new to the game, something a little daring might work best. Later on, you might want to play it safe. It’s the same for property investment and the stage you’re at reflecting how risky or safe your loan structure needs to be. Here we weigh up the pros and cons of principle and interest loans vs interest only loans for property investors.
The Three Golden Rules of Selling an Investment Property
Rules are an important part of life. And rules in most cases, are really just another word for common sense. They give us a clear framework around many important aspects of life, so it’s no surprise when it comes to selling your investment property, there’s a number of rules you need to follow in order to get the best result.
If you want to know when to sell an investment property, or even if selling an investment property is a good idea, all you have to do is read the rules.
Use Debt To Create Wealth in 3 Simple Steps
Most of us were raised with the idea that debt is bad. Debt drags you down. Rich people are never in debt.
While that may have been true for our great grandparents, it’s no longer the case. Debt is one of the keys that can unlock future wealth as a property investor. The more good debt you have, the more income you can create.
But, before you go out and put yourself $1 million in the hole, let’s talk about the right kinds of debt. The debt that’s going to lead to success, not ruin. This is called…
Harness Data To Help Guide Property Investor Profits
I’m sure you’ve heard – data is the new currency. It’s the next big thing for business and it will be a catalyst for driving the world forward over the next few years. Learning how to harness the power of data in property investing, will be a secret weapon all investors can use to create more wealth. So, what is data? It’s information, insights and predictions that property investors can use to help them make smart property purchases.
A Lending Boom Is Coming Are You Ready?
After a lot of bad news over the past 12 months – thanks a lot COVID-19 – it’s nice to be able to kick off 2021 with some good news. There’s going to be a lending boom which, if you have your property investment strategy in place, is going to make your life a whole lot easier so you can build your property portfolio faster and cheaper.
What Is the True Value of Your Investment Property?
Like a fine wine, the value of property gets better over time. Traditionally, the more time you have an investment property, the higher the value will rise.
However, unlike your favourite Shiraz, property values can go up and down, and up again.
Getting to know how, why and who is valuing your property can help us understand what property to invest in.
There are three ways to value a property – and three very different people doing the valuing.
The 3 ‘Big Rocks’ of Property Investment Success
What are your Big Rocks this year? What are your Big Rocks for your property investing journey?
If you’re scratching your head and wondering if you’ve accidentally stumbled across a blog for construction workers, bear with me.
Big Rocks is a concept often used in business or life coaching to essentially describe your priorities. The theory is, if you don’t have clear priorities, or if you have too many, chances are you’ll let smaller issues distract you and ultimately fail in your goals.