Just purchased an investment property? Here’s what to do next

Purchasing an investment property is an exciting time for investors with endless potential to generate passive income and build long-term wealth. However, it’s important that investors know what to do once the purchase stage is complete and how to prepare the property for tenants.

Here is what investors can do to best prepare their investment property and finances.

Secure insurance

Securing insurance is the first thing an investor should do; this will protect the property and financial interests of the investor if anything should go wrong.

Insurance policies include building insurance, landlord insurance and contents insurance if the property is furnished. Income protection should also be taken out to help ensure that financial obligations can be met in the case of a sudden loss of income due to illness or injury.

Hire a property manager

A property manager will manage the day-to-day responsibilities involved in an investment property including collecting rent and any arrears, advertising, screening and securing tenants, organising property maintenance, conducting routine inspections, property administration, communication with tenants and staying up to date with tenancy laws and other relevant information.  

While hiring a property manager comes at a cost, many property investors find that the benefits outweigh the expenses.

Conduct necessary repairs and maintenance

Necessary repairs and maintenance should be carried out to help attract quality tenants and potentially reduce the likelihood of costly repairs down the track.  These repairs can include fixing any damage and ensuring all appliances are in working order.

Investors must keep in mind that repairs and maintenance costs are fully tax deductible, and remember to keep all records so it’s easier to claim at tax time. Although, for updates or renovations, investors should get in contact with a quantity surveyor before and after so their tax depreciation schedule can accurately display the available tax deductions for future years and any potential scrapping value. 

Know which tax deductions you’re entitled to

Investment properties generate lucrative tax deductions for their owners including the interest on an investment loan, insurance premiums, body corporate fees, depreciation and more.

Loan interest is up the largest tax deduction for Australian property investors with a combined claim of over $21 billion in the 2019/20 financial year.

Depreciation is the second biggest deduction making up a combined claim of $6 billion in the 2019/20 financial year.

Depreciation is, in a way, more lucrative as investors don’t need to spend any money in order to claim it, unlike other deductions.

Depreciation is the natural wear and tear of an income-producing property and its assets. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this depreciation as a tax deduction.

Capital works deductions (Division 43) are claimable on the building’s structure and assets permanently fixed to the property. Plant and equipment depreciation (Division 40) is claimable on assets that are easily removable from the property or mechanical in nature. Investors can claim maximised deductions on all qualifying assets by ordering a tax depreciation schedule.

If you need assistance with your tax planning, contact KMT accountants today!

The article is provided by BMT Tax DepreciationBMT Tax Depreciation is Australia’s leading supplier of residential and commercial tax depreciation schedules. For more information on how investors can best take advantage of depreciation deductions within an investment property, contact the expert team at BMT.