Negative gearing just one aspect of investment property: Mark Bouris

Thursday 23 Jun 2016

Mark Bouris, the executive chairman of Wizard Home Loans says the current debate about negative gearing involves just one aspect of investment property.

"But the true priority for most property investors is the success of the investment itself. 

He advises that to make an investment property worth your while, it should deliver long-term capital gains and sustainable cash-flows.

"Achieving this goal usually comes down to controlling your costs," he said adding that tax law allows investors to treat an investment property as a business, which means the business inputs are deductible for tax purposes.

He advised that optimising costs deductions made a big difference to how any investment performed long-term offering five tips.

1) Remember allowable deductions include fixing damage from natural causes such as falling trees and heavy storms, particularly relevant for many this month.

2) If you live some distance from your investment, travel to and from your property is tax-deductible, as are trips to your property agent. But the trips must be on official business as a landlord.  Track these costs by entering your travel (and reasons) in a diary, keep relevant receipts, and if you use your car, use only a vehicle-expenses formula listed on the ATO's website. 

3) Sometimes disagreements about your property can turn into legal disputes. The ATO allows deductions on court costs, damages claims against you involving your investment property, and the costs associated with evicting non-paying tenants.

4) If you use a property management company to rent the property and manage the tenants, you will pay a fee  that is deductible. Your ongoing management costs include the costs of setting up new bank accounts, council rates and water charges, for example.

5) If you secure a mortgage to buy your investment property, there are many costs that come under the deductions umbrella, including lender's mortgage insurance, mortgage broker fees, loan establishment costs, property taxes   (for example, stamp duty), and valuation fees. However, it needs to be amortised over five years or per the terms of the loan. Be aware that the interest you pay on the loan is deductible, but repayments of principal are not. Which is why property investors generally have interest-only mortgages.

There is a lot of information for property investors on the ATO website, he notes.

"But for first-timers, I strongly suggest using an adviser, such as an accountant or financial planner, even if only for the initial set-up of the investment and advice on how to manage to it."

 

http://www.propertyobserver.com.au/forward-planning/advice-and-hot-topics/54922-negative-gearing-just-one-aspect-of-investment-property-mark-bouris.html

- Property Observer