How to make your rental property work harder – Part 2

In part 1 of my two part column we looked at ways to improve the rental yield on your investment property. Strategies included making a good first impression and focusing on the little things, furnishing the property, investing in bigger ticket items, renovation and securing longer term tenants.

Now lets turn our mind to reducing operating and holding expenses. Here are my top five cost savings tips:

Interest and associated borrowing fees are by far the biggest expense property investors incur. Take out the wrong loan and you could be thousands of dollars out of pocket not to mention your investment strategy could be undermined.

The present lending market is ideal for investors low interest rates and considerable competition among lenders, especially the non-bank lenders. So there is no shortage of options when it comes to investment property loans. When choosing your loan, you should consider the following questions:

Does the borrowing structure support your tax position? Is an interest only or interest and principal loan the best option?

The right property manager can make a big difference to the success of your investment. Attracting and retaining the right tenants, rent collection, overseeing ongoing repairs and maintenance work and carrying out regular inspections are some of the key responsibilities they undertake which not only helps maximise your rental income but helps protect your property from damage and the effects of wear and tear.

When selecting your property manager you should not only research, review and compare commission levels and other costs (which could significantly eat into your rental income if they are unreasonably high) but also their track record, knowledge of the market and renter preferences, as well as their connections with quality and competitively priced tradespeople.

Most investors understand the concept of depreciation but not everyone gets the maximum benefit meaning they are not minimising their tax liability.

In general terms properties built after July 17, 1985 are eligible for a depreciation allowance of 2.5% of the original construction cost a year for up to 40 years. So for a dwelling on a land which cost $200,000 to build, you could claim $4,000 a year depreciation as a tax deduction.

For all properties fixtures and fittings can be depreciated in line with the rules set by the Australian Taxation Office (ATO). Interestingly not all allowable depreciation claims are made because owners are not always aware of what can and cant be included, especially for older properties. And this includes major renovations of a capital nature. For this reason its a good idea to appoint a quantity surveyor who can inspect the property and prepare a depreciation schedule which will normally be acceptable to the ATO.

See the article here:
How to make your rental property work harder - Part 2