Successful Rental Property Investment & Maximise Your Tax Refunds

Investing in a rental property doesn’t have to be a lot of extra work, but when done properly, property investing can generate a lot of paperwork and email correspondence. So what should you keep, and what do you throw out? Keeping your records organised is important in the running of your investment properties and any other investment you maintain. This will not only assist when preparing your Tax Return, but also guard against any future Audits by the ATO.

You can use various types of software packaged to assist. From a range of comprehensive packages for rental property investors, to using cloud accountancy packages, or you can go solo and DIY it with the good old Microsoft Excel or our hand Rental Property Worksheet.

Annual Tax Return files for your Rental Property:

  • Set up annual files or folders – one for each of your properties. This will run for the financial year and should contain:
  • Your receipts and invoices
  • Rental statements
  • Property inspection records
  • Loan statements with the interest
  • Tenancy agreements

Come in and visit us today for a Rental Property worksheet to assist you at tax time.

Keeping these records in an organised manner will help you keep track of your cash-flow and will make sure you have everything you need at hand.  It is important to keep each annual file for a period of 5 years from the date of lodging the tax return.

Other Files to keep

Some files need to be kept for the life of the asset and we suggest you set up permanent files, one for each property. You will need to keep these files from purchase to post-sale of the asset.  This will assist in the calculation of any capital gains or losses and if any other issues may arise from time to time in maintaining your investments.

This will include:

  • Purchase contract
  • Solicitor’s settlement letter or statement on purchase and sale
  • Loan agreement and any ongoing refinancing
  • Depreciation schedule
  • Renovation costs, details of costs and amounts
  • Communication between you and your rental property manager and your tenants
  • Details of any changes to rent or tenancy conditions
  • Tenancy application forms
  • Contract of sale
  • Selling agent agreement
  • Any loan finalisation documents.

Each permanent file is to be kept for 5 years from the date of lodgement of the tax return in which the rental property sale is declared.

Here are 10 Rules for Successful Rental Property Investment

 Many of our clients are asking us about property investments, and the best way to structure these in order to reduce tax.

Buying the right property is the key. Recently we read an awesome list put together by property consultant Michael Matusik, and his 10 rules for successful property investment really make sense to trends up

Here’s what Matusik said, “My rules apply to “passive” investors – the “set and forget” types (which is the vast majority of the market – more than 90% of investors, according to survey results) and not to the “renovator junkies”, as we like to call them.

The property must be:

  1. New, or at least recently renovated, to maximise depreciation/tax return and gross rental returns.
  2. In a small or multi-staged development. Preferably under 50 dwellings. Large properties should not be ruled out. They must, however, have substantial points of difference, i.e. well-proportioned and well-appointed apartments; quality facilities and finishes; and good access.
  3. In a strong location – “infill” highly favoured, with high existing amenity; a great “walk-score”; and more importantly, potential for above average mid- to long-term capital growth.
  4. In an area with five or more pillars of economic support, including cumulative demographic/rental demand and high employment/wages growth.
  5. Within five minutes of “hard-core” infrastructure i.e. major work nodes; secondary schools; entertainment precincts and public transport, especially rail.
  6. Delivered by a proven development team.
  7. High quality in terms of design, materials and construction. It must require minimum maintenance.
  8. End prices under $600,000; better still, less than $500,000; and they must yield more than a 5% gross rental return.
  9. Limited new dwelling supply when compared with underlying demand.
  10. Sold with independent API registered valuation support and within an acceptable range of sales/marketing commission.

So, stick to the 10 and you’ll make millions? Well, short answer – there are no shortcuts and no guarantees. But by following these 10 rules we believe you can, with a little effort and knowhow, convert a modest deposit into a sizeable nest egg. But (yes, there is always one) don’t do it blind-folded – seek independent investment advice, have at least a 10% deposit, and have a truly spare $100 per week available to afford to buy that investment property.”

Your Action Plan

Talk to the team today if you are interested in Rental Property investing. We can provide you with independent advice about the best name to put on the contract, the best loan available for your circumstances, how to maximise tax advantages, and the cashflow outcome for you of buying an investment property.