One tax expert has shared top three tips you can follow if you’re keen to know how to grow your property portfolio this year in light of changing market conditions.
BMT Tax Depreciation CEO Bradley Beer said that it is difficult to predict “with certainty” what lies ahead, so optimising your portfolio early in the year will increase your chances of it being a successful one — and help you ride out any bumps along the way.
1. Review borrowings
Mr Beer said that investors should assess the debt situation in their property portfolio to ensure it is making the most of the available mortgage products in the current low interest rate climate.
“A properly structured portfolio can save investors thousands of dollars in fees,” the expert said.
“So, it may be worth doing a mortgage health check on your portfolio at the start of 2018 to enjoy any benefits throughout the year and into the future.”
Mr Beer also said that it is important to keep an eye on potential rate movements.
“It will also be important to consider the impacts of any further measures to slow investor lending and the possibility of the Reserve Bank of Australia hiking rates this year.
“It may therefore be a good time to make extra contributions to an offset account to create a buffer in your finance commitments.”
2. Price properly
Correct rental pricing is the best way to attract, or hold, good tenants, Mr Beer said.
“Investors should research local rental conditions and the rent charged for similar properties in their area before clarifying with their property manager whether the rent they are charging accurately reflects the property and the market.
“If one finds themselves in a softening market, it might pay to assess whether your current tenants are occupants you wish to retain over the long term. If the answer is yes, then you might want to review the condition of your property to ensure it is in an adequate state to keep your tenants happy and encourage them to stay.”
3. Claim well
According to Mr Beer, make sure that you are across all of the legitimate tax deductions you can claim as an investor, especially in the light of the recent changes to the depreciation rules.
But despite the new rules, there are still plenty of opportunities to take advantage of depreciation claims, the expert said.
“Capital works deductions remain untouched, allowing affected investors to claim depreciation for structural features of the property such as walls, ceilings and doors over the property’s effective life of 40 years,” Mr Beer said.
He also made the point that investors who exchanged contracts on a second-hand investment property prior to the cut-off date are unaffected as the rules have been grandfathered.
“These investors can continue to claim both capital works deductions and plant and equipment depreciation as normal.”