{"id":7268,"date":"2016-03-10T01:00:45","date_gmt":"2016-03-09T14:00:45","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=7268"},"modified":"2016-03-10T01:00:45","modified_gmt":"2016-03-09T14:00:45","slug":"new-properties-make-better-investments-because-of-depreciation-allowances","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/new-properties-make-better-investments-because-of-depreciation-allowances\/","title":{"rendered":"Myths: New properties make better investments because of depreciation allowances &#8211; Ken Raiss"},"content":{"rendered":"<p>&nbsp;<br \/>\nIn today&#8217;s show we find out from\u00a0<strong>Ken Raiss<\/strong>,\u00a0from Chan &amp; Naylor,\u00a0if new houses make better investments than established ones because of depreciation.<br \/>\n&nbsp;<\/p>\n<h4><strong>Transcript:<\/strong><\/h4>\n<p><b>Kevin:<\/b>\u00a0 As we dispel or maybe prove another myth \u2013 and that is that new properties make better investments because of depreciation allowances \u2013 I\u2019m talking now to Ken Raiss from Chan &amp; Naylor.<br \/>\nProbably a reasonably common misconception, maybe. Do you think?<br \/>\n<b>Ken:<\/b>\u00a0 I think so. Definitely a misconception.<br \/>\n<b>Kevin:<\/b>\u00a0 A lot of people think that depreciation only comes with a new property.<br \/>\n<b>Ken:<\/b>\u00a0 Depreciation comes with any property. Obviously, a 100-year-old property might have very little, but it could have been renovated and had some depreciation on the renovations. People don\u2019t understand what that is. Depreciation is an expense but without a cash outlay. The benefit is only in the tax, so if you\u2019re in a low-tax situation or a no-tax situation, then it has little to no benefit to you in any case.<br \/>\nWhat we have to look at is are we buying a new property that could, in fact, be overpriced? That\u2019s because the developers have their margin in there. Can I say, there\u2019s even less price comparison, because if you\u2019re buying a new property in a building of 50, they\u2019re all the same price, so there\u2019s very little room to maneuver to negotiate a lower price.<br \/>\nThe other important thing\u2026 And I think it\u2019s a funny thing I\u2019m going to say, but nevertheless true. The name of the game is to maximize your capital growth and income, and people forget that. They look to maximize the things on the fringe, not the main game.<br \/>\nWhen you\u2019re buying an investment property, you\u2019re doing it to make a profit, to create income for you in the future, and that income is derived from two sources. It\u2019s the increased capital gain that comes over time, which allows you to increase your rent. It also comes from the capital gain itself, but even if you don\u2019t sell, that increased capital gain is crucial because in a lot of instances, it allows you to borrow against that increased capital growth to then go and buy another investment property. It becomes the feeding trough, if you like, of your investment portfolio. You always have to keep that pool growing, so capital growth is critical.<br \/>\nWhen you\u2019re buying a new property, you\u2019ve really only got the market forces that will give you that capital growth, that rent. If you\u2019re buying in a slump or you\u2019re buying in a time when property prices have been depressed a while, you just have to sit and ride it out, but if you can buy an existing property that you can do a renovation to, then you\u2019re actually manufacturing your own equity. That gives you capital growth, that allows you to increase your rent, and it also allows you to borrow for future investments.<br \/>\n<b>Kevin:<\/b>\u00a0 Also, when it comes to depreciation, Ken, there are things like scrapping allowance, which I\u2019d like to talk about, as well. That applies if you\u2019re doing some renovations.<br \/>\n<b>Ken:<\/b>\u00a0 Correct. You have to be careful. You have to do the renovation in between tenants to be allowed to claim that scrapping schedule. What the scrapping schedule allows you to do is put a value on all those things that you\u2019re throwing away.<br \/>\nA lot of people buy a property and develop it. They might buy a single property and build a duplex. You can them do what\u2019s called a demolition schedule, which allows you to write off that amount of the building depreciation that hasn\u2019t already been claimed.<br \/>\nYou get those in the year that you either did the renovation or the demolition. Then when you build the reno or the new property, you then get a depreciation schedule and depreciate from that point onward. They\u2019re critical.<br \/>\nJust thinking a bit wider, the other thing a lot of people forget when they look at depreciation is if you buy in multiple names, you should get what\u2019s called a split depreciation schedule, not just one. So, one for each of the people on the title. That allows you to significantly increase the rate of depreciation.<br \/>\n<b>Kevin:<\/b>\u00a0 Ken, any closing points?<br \/>\n<b>Ken:<\/b>\u00a0 One crucial thing is if you ever sell that investment property, you have to add back the building depreciation to increase your capital gain.<br \/>\n<b>Kevin:<\/b>\u00a0 Ken, thank you so much for your time. Ken Raiss from Chan &amp; Naylor.<br \/>\nThanks, mate.<br \/>\n<b>Ken:<\/b>\u00a0 My pleasure.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; In today&#8217;s show we find out from\u00a0Ken Raiss,\u00a0from Chan &amp; Naylor,\u00a0if new houses make better investments than established ones because of depreciation. &nbsp; Transcript: Kevin:\u00a0 As we dispel or maybe prove another myth \u2013 and that is that new properties make better investments because&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":6723,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[10,11,13,36,17,25],"tags":[101],"class_list":["post-7268","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-sponsored-channels","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Myths: New properties make better investments because of depreciation allowances - Ken Raiss - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/new-properties-make-better-investments-because-of-depreciation-allowances\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Myths: New properties make better investments because of depreciation allowances - Ken Raiss - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"&nbsp; In today&#8217;s show we find out from\u00a0Ken Raiss,\u00a0from Chan &amp; Naylor,\u00a0if new houses make better investments than established ones because of depreciation. &nbsp; Transcript: Kevin:\u00a0 As we dispel or maybe prove another myth \u2013 and that is that new properties make better investments because...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/channels.realty.com.au\/realtytalk\/new-properties-make-better-investments-because-of-depreciation-allowances\/\" \/>\n<meta property=\"og:site_name\" content=\"Realty Talk\" \/>\n<meta property=\"article:published_time\" content=\"2016-03-09T14:00:45+00:00\" \/>\n<meta name=\"author\" content=\"rolanrush\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rolanrush\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/channels.realty.com.au\\\/realtytalk\\\/new-properties-make-better-investments-because-of-depreciation-allowances\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/channels.realty.com.au\\\/realtytalk\\\/new-properties-make-better-investments-because-of-depreciation-allowances\\\/\"},\"author\":{\"name\":\"rolanrush\",\"@id\":\"https:\\\/\\\/channels.realty.com.au\\\/realtytalk\\\/#\\\/schema\\\/person\\\/384a57ac9e52cb9bf19896cb15eaa52d\"},\"headline\":\"Myths: New properties make better investments because of depreciation allowances &#8211; 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