Investor Newsletter – July 2019
The difference a depreciation schedule can make to your cash flow?
Case study example: A new three-bedroom house @ $600,000
Ian purchased a new three-bedroom house for $600,000 just over one year ago.  He rented his property and received a rental income of $545 per week, or $28,340 per annum.  The expenses on the property for interest, rates, management fees and maintenance costs totalled $39,067.  Towards the end of the first year of owning the property, Ian’s annual after-tax outlay amounted to $6,758 or $130 per week.
At the end of the financial year, Ian contacted his tax depreciation expert, who completed a thorough site inspection and provided a detailed tax depreciation schedule for the property. The schedule showed that Ian could claim $11,200 in depreciation in the first full financial year alone. *We recommend speaking with your accountant or a specialist Quantity Surveyor.
83 per cent of Australians are underinsured
Research from Insurance Australia Group Limited has found that one in twenty homes are not insured and up to 30,000 home owners fail to renew their insurance each year.
An Insurance Council of Australia survey found 83 per cent of Australians are underinsured for home and contents. For property investors, this means facing considerable losses and risking financial hardship in the case of major tenant damage or a natural disaster.
It’s more important than ever to know the true replacement cost of your property, fixtures and fittings, to ensure you are adequately covered.
While you may have known the replacement value of your property some time ago, construction costs fluctuate, which means your current insured value can easily become outdated, putting you at risk of under-
An over-insured property can also lead to owners outlaying more money on higher premiums that provide unnecessary cover.
If you want to know the true worth of your property we recommend obtaining a tax depreciation statement from a specialist Quantity Surveyor.
Whether you are building your property investment portfolio, buying a holiday house or supporting a family member, there is always a lot to consider before you take that next step.
Cashflow Property tends to be a long-term investment, so do your sums to make sure you can afford the ongoing repayments on two mortgages. Think about any major life changes, such as planning to expand your family, or you might need to support a parent in the coming years.
Get to know the market and location Research what is happening in the current market and whether it’s the right time for you to buy. Get to know the area you are considering by speaking to residents and real estate agents. It’s also wise to investigate the short and long-term planning for the area. For example, nearby construction may affect your ability to find a tenant.
Investigate before you invest If you’re buying a property as an investment, carefully consider its location. Buying in a high-demand area is likely to see you enjoy a constant flow of income from the rent.  You will need to provide your lender with a rental appraisal estimate letter and keep in mind that lenders generally only take 50–80% of the rental income into account when calculating whether you can afford the loan.
Choose the right mortgage The amount you can borrow and the type of loan you choose will depend on various factors, including the equity in your current home, your income and expenses, and your property valuation. It helps to get quality advice on the right mortgage for you, along with other considerations, such as negative gearing, and how to structure your loan to maximise tax effectiveness.
Tenants move out for a variety of reasons. As a property investor/landlord, you can control some of the reasons while others are just a matter of preference.
1.    Cannot afford the rent
2.    Property is too small for their needs
3.    Property is too large for their needs
4.    Job change/relocation
5.    Maintenance issues not being attended to
6.    Problems with neighbours
7.    Wanting to change location/neighbourhood
8.    Separation/divorce/marriage
9.    Renter’s market – more affordable properties available
10.  Purchase their own property
Do you check them?
It is important to check your monthly financial statements closely to ensure they are correct.
Whether it is your end of month rental statement, credit card, bank or other account. Most statements are now electronic (rather than the traditional paper copy), which can result in many not taking the time to look at the monthly transactions.  Banks can make errors; fraudulent transactions are on the rise – so make sure you check your statements regularly.