14 Sep Calculate depreciation before you buy – Brad Beer
We often discuss the benefits of obtaining a depreciation schedule once an investment property has been purchased, but are there any advantages to discovering what deductions can be claimed before you buy? How can investors discover the depreciation potential of a property without obtaining a full depreciation schedule? We find out from Brad Beer.
Kevin: We quite often discuss the benefits of obtaining a depreciation schedule once an investment property has been purchased, but are there any advantages in discovering what deductions can be claimed before you buy? Brad Beer from BMT Tax Depreciation joins us.
Brad, are there any ways that investors can discover the depreciation potential of a property without obtaining a full depreciation schedule?
Brad: Yes, Kevin, very easy to do that. The amount of data that we have these days and also the sheer hundreds of thousands of depreciations schedules we’ve done, we’ve probably seen a property similar. So, we’ve built some things so that we can come up with an estimate of how much deduction might be available to a property that you’re looking at buying.
That might be through a simple estimate that can be done on a calculator that’s on the website, that we put some information in about, that’s free for you to use as many times as you like. It spits out an approximate number. Obviously, it’s based on the information that you put in.
The other thing is we can have a look at the information that you do have available. Once we know the address of the property, we can pretty much see most things about it these days, if it’s been rented before, and come up with a fairly close approximate number of what sort of deductions would be available.
Kevin: It’s pretty shocking, but we do realize that there are still a number of property investors who don’t do a depreciation schedule. Just to give me a bit of an idea, what information is included in a comprehensive depreciation estimate?
Brad: The important thing is the approximate number in the first year or the first five years, because the reason you need to know that is so that you can go in and crunch those numbers. But we can do it fairly quickly and easily over the phone with some information that we can see pretty quickly.
But then sometimes if you are buying in a development, then there may have actually been one prepared for the developer or for the guys who are selling it that has a bit more detail because we have things like schedules of finishes on new stuff and things that give us a bit more detail.
Kevin: Can you give me a bit of an idea about how crunching those numbers can help investors with their purchase decisions, Brad? Have you had some experience with that?
Brad: I’ve spent 19 years in this business. I’ve been to lots of different property expos and everything under the sun as far as learning about property investment, and I guess it almost saddens me to see that people don’t crunch their numbers on everything before they buy property. And the fact that they don’t buy a depreciation schedule for some time after is concerning.
I think whenever you’re buying property there’s a lot of things to consider: the area, the drivers in those areas that are going to give you that growth.
Look, I’m the depreciation guy. Depreciation is not the most important thing and you shouldn’t buy for depreciation, but you should really know what that cash flow looks like for you, after tax, given your income on a specific property you’re looking at, so that you really crunch the numbers and know what that’s going to look like for you to make sure that you can afford it and you have that risk covered.
Kevin: Are depreciation estimates also useful for developer’s agents, mortgage brokers, and loan providers, Brad?
Brad: All of these people are involved in this transaction prior to an investor buying, or maybe not always, all of them – if it’s second-hand property, usually not a developer, obviously. But when someone is either selling, financing, or building a particular product, an investment property or potential investment property, it’s very easy for us to provide some sort of numbers to a potential purchaser to help them crunch those numbers.
So, if you’re in any of those property expertise, you’re involved with these people who may be buying investment properties, knowing that exists and being able to actually talk about it – “Well, depreciation is important. Have you thought about it? You have to crunch your numbers properly” – they can get that information very easy from us.
Kevin: Okay. Give us that website again, because you mentioned there are a number of calculators on the website as well, Brad?
Brad: It’s BMTQS.com.au. There’s a tax depreciation calculator part there, that’s very easy. It’s an app also. You can download it and use it. It’s free, as many times as you like. Just make sure you use that to crunch your numbers. Or if you have an existing property, you can use to that see that you’re getting all you get and amend if necessary or see whether it’s worth having a look at. But, very easy to find.
Kevin: Good on you, mate. Thanks for your time. That’s BMTQS.com.au. Brad Beer, thanks for your time, mate.
Brad: Thanks, Kevin. Much appreciated.