Wouldn’t it be great if all landlords realised that investing in property is really no different to investing in a business? An investment portfolio, whether it consists of one or several properties, should be run as a business with the intent to grow asset value and provide ongoing returns.
In addition to growing asset value and creating decent ongoing returns, there are also tax incentives to owning an investment property, just as there are allowable deductions when you own a business.
Tax advantages of owning an investment property include the ability to have a tax depreciation schedule completed on the investment property. Over time, items in a property begin to deteriorate and depreciate in value. The ATO allows property investors to claim tax back for depreciation through wear and tear. The same is true for the structure of the building. Many plant and equipment items within an investment property may be depreciated over their effective lives, including (but not limited to) floor coverings, window treatments, hot water systems, light fittings and kitchen appliances.
Other property-related expenses that landlords may be entitled to claim include interest, accounting fees, repairs and maintenance costs, borrowing costs, management fees (yes, your fees are tax deductible too), legal and accounting fees, insurance, mortgage insurance, rates, and capital deductions. Naturally, everyone’s financial situation is different so a landlord must always seek independent advice on what they can and can’t claim and what is in their best interests.
So why don’t more landlords take a businesslike approach to managing their portfolio? If they saw the similarities to running a business they would understand the need to provide a safe premises and the value of keeping on top of maintenance and repairs.
What do safety and maintenance have to do with it?
Like any business owner, it is a property investor’s responsibility and duty of care to provide a safe environment for the people that inhabit and visit their ‘premises’. In fact providing a safe environment is both a moral obligation and a means to mitigate risk. Furthermore, by keeping an investment property in good condition, addressing repair and maintenance issues as they arise, landlords will find that they will be able to charge a premium price and attract quality tenants who are more likely to look after the property as though it were their own. Those tenants would also be more likely to stay, reducing vacancy periods.
A service that ticks the boxes for both safety and property maintenance is PropertySafe and Maintenance Manager. Maintenance Manager is a cloud-based risk mitigation and property maintenance system. It is ideal for property managers as it automatically issues reminders and relevant correspondence to landlords, tenants and trade suppliers, making it easy to stay on top of maintenance and repairs. PropertySafe is Australia’s leading residential property safety inspection service. Inspections are carried out by fully licensed and insured safety inspectors, who complete detailed reports designed to alert property owners to safety risks and provide options to mitigate those risks. By offering the service to landlords, Maintenance Manager is provided to your office free of charge. The two work hand-in hand, making your job easier and removing the risk of potential litigation.
What about those landlords who resist doing anything that has a cost attached to it? Yes, we all know those landlords! Explain to them that having a PropertySafe inspection report done once every two years is like taking out a cheap and effective insurance policy. If anything has been missed, the onus rests with PropertySafe rather than with the landlord or the property manager. You can also let them know that having a property certified as safe can result in the achievement of higher rent, which in turn attracts better tenants. This fact generally more than offsets the cost of the report. While most inspections do identify a number of safety issues, the majority of those would be relatively easy and cost effective to resolve. Sometimes (for a minor issue) it’s simply a matter of advising the tenant to take extra care. Click here to learn more about Maintenance Manager and Property Safe and how the two work together to become a property manager’s best friend.