Tips for owning an investment property for less than $1 per day

Tips for owning an investment property for less than $1 per day Have you wondered why nearly two million Australians claim a tax deduction on property they own?

There is a simple answer: an investor is allowed to claim deductions on their income tax returns if their expenses of ownership are higher than the rent received from the investment property.

This highlights one of the benefits of owning a newer property compared to an older property. Let’s explore why smart investors are taking advantage of one of the important benefits of owning an investment property.

New versus old property.

Many investors are completely ignorant of the quantum of tax that can be saved by claiming what is available on their investment property - tax depreciation. This factor alone is often the difference between making or losing money on your investment – and your preferred option should always be to make a profit!

In the case of depreciation on fittings, for example such as a hot water system; this can be depreciated over 10 years, carpet 5 years, and so on. As a rule, newer properties tend to have more depreciation. The amount of depreciation can be anywhere from $1,000-$15,000 in the first year, depending on the property and the assets.

Some investors will spend time looking at buying in locations which offer high rental yield. That may be fine for some, but long term investors will seek a combination of high yield (after tax returns) plus capital appreciation. A high yielding suburb may not offer high capital growth prospects.

A typical investor will reduce their holding costs to under $1,000 a year and in some cases even less, when depreciation deductions are factored in. For example an apartment in The Belle Apartments Boronia, are priced between $309,000 and $385,000, therefore, when negatively geared, for example borrowing 70 percent of the cost, the holding costs can for some investors, may be as little as a dollar a day.