May 19, 2024
Turn your main residence into an investment property
If you're considering upgrading your current home or downsizing, retaining your original property as an investment can be a strategic financial move. However, before you embark on this journey, it's crucial to understand the tax implications. Here’s a comprehensive guide to ensure you're well-prepared. Capital Gains Tax & main residence exemption. Typically, any profit or loss from selling your main residence is exempt from CGT. However, if you convert your property into a rental, the exemption rules change. Here's what you need to keep in mind: Initial investment property: If your property was first used as an investment and later became your main residence, you'll need to apportion any capital gains based on the time the property was used for each purpose. Main residence first: If you first lived in the property and then rented it out, the CGT calculation will involve determining the property's market value at the time you started renting it. You only pay CGT on the gains from that point onward. Non-residents: If you’re a non-resident when selling your property, you don't qualify for the main residence exemption. This is crucial for expatriates and those living abroad who maintain properties back home. Six-Year Rule Under the Six-Year Rule, you can treat your property as your main residence even after moving out. This allows you to keep the main residence exemption for up to six years if the property is rented. After six years, any gains during the rental period become fully taxable. However you must remember you can only have one main residence at a time, so if you buy nother property to live in you might lose yoru 6 year exemption. There are a two important considerations: If you purchase a new residence, you might forfeit the exemption for the old property if it's rented. If the property remains vacant, (and you don’t own another residence) the exemption period is indefinite. However, recent changes in vacant land costs may make leaving the property empty a costly choice. Taxable income & deductions Rental income is fully taxable, but you can offset it with a variety of deductions. These include immediate deductions and spread deductions. Immediate deductions: Interest on property loans, advertising costs for tenants, repairs and maintenance (after the property is rented), rates and taxes, body corporate fees, managing agent fees, and insurance premiums. Spread deductions: Borrowing costs, depreciating assets, and capital works (building costs) are spread over time. Note that repairs and improvements made before renting the property are not immediately deductible. They might qualify as depreciation, or they could form part of the capital costs, reducing the overall taxable capital gains later on. Depreciation, capital works, and the 2017 depreciation deduction change. Depreciation and capital works deductions offer substantial benefits. A qualified quantity surveyor can prepare a detailed depreciation report to outline the deductions available. However, there have been changes in depreciation rules for previously used residential properties. As of July 1, 2017, Investors can no longer claim depreciation on second-hand assets (e.g., appliances or furniture) purchased with the property. Instead, these assets are factored into the overall capital gain or loss when selling the property. Important considerations before renting out your home Renting out your home involves a number of strategic, and even emotional, decisions. Here are a few key points to keep in mind. Market timing: Consider whether it's the right time to rent out your property based on the rental market and property values. Talking with a trusted real estate agent (like Ascent Property Co) can provide powerful insights and peace of mind here. Property management: Decide if you'll manage the property yourself or hire a professional agent. (Ascent Property Co) Legal compliance: Understand your obligations as a landlord under local tenancy laws. If you choose to hire a professional property manager, they’ll assist here. Insurance coverage: It vital to secure adequate insurance coverage that includes landlord-specific protections. Tax planning: Every investment property is unique, and strategic tax planning will ensure you're maximizing deductions and minimising future liabilities. The level of equity in your old house also needs to be reviewed to determine if it is more tax effective to rent out or sell. Ready to turn your home into a lucrative investment? Retaining your original property as a rental requires expert advice. Every property is unique, and tailored tax planning can ensure you're maximising your investment. Contact us to understand your potential financial gains and minimise any risks involved, and reach out to Ascent Property Co for tailored guidance and support on selling or leasing your property.
May 6, 2024
A guide to navigating the sale of property from the deceased.
Inheriting a deceased estate — property and belongings from someone who has passed away — often marks a challenging, emotional, and complex period. The sale of such a property, in particular, comes with many legal intricacies and requires a thorough understanding of the process. The journey to legally transferring ownership and proceeding with the sale involves multiple critical steps as well as legal expertise and guidance. Let’s set the scene. Understanding the legal foundations. The process starts by obtaining the necessary legal documents: probate or Letters of Administration, contingent upon whether the deceased left a Will. Probate serves as a legal confirmation of the Will's validity, permitting the executor to proceed with estate management. In the absence of a Will, Letters of Administration are essential for an appointed individual to take charge of the estate. A step-by-step process. Attain probate or Letters of Administration: The initial step requires securing probate from the Supreme Court, if a Will exists. Without a Will, one must apply for Letters of Administration — a task that, while complex, equips the administrator with equivalent authority to that granted by a Will. Transfer title: Following the acquisition of the necessary legal standing, the next move involves updating the property title with the executor or administrator's name. Beneficiary transfers or sale: The final stage encompasses either transferring the property to the beneficiaries or selling the property and distributing the proceeds among them. The challenges of legal proceedings. Obtaining probate can be time-consuming, but the absence of a Will complicates matters further. Nonetheless, once Letters of Administration are secured, the path to selling or transferring the property is the same as the process followed when a Will is present. The critical difference lies in the application for Letters of Administration, which demands the consent of all beneficiaries under the Administration Act 1903. Preparing for sale: consent and considerations. Even with a Will, selling a property from a deceased estate doesn't always proceed seamlessly. Securing the consent of all entitled parties is a prerequisite for any sale or transfer not explicitly outlined in the Will or under the Administration Act 1903. It’s a good idea to prepare a deed of family arrangement, detailing agreed terms concerning the property, which requires the signatures of all beneficiaries. This legal document (best crafted by a Lawyer), aims to mitigate potential disputes and streamline the sale process. The role of professionals. In case it’s not obvious at this point, this process is extremely complicated, and often, emotionally draining. Given the intricate legal landscape surrounding deceased estates, enlisting professional help is highly recommended. Legal professionals, including solicitors and settlement agents, are invaluable resources for navigating the procedural complexities, ensuring all documentation is meticulously prepared and legally sound. Let Ascent Accountants & Ascent Property Co help you during this challenging time. Selling a property from a deceased estate is full of legal challenges and procedural nuances. Each step requires careful consideration and expert guidance, but we have a network of legal experts ready to ease the burdens here. Ascent Property Co can also provide you with estimated values and help sell the property. Contact us and we’ll connect you with the right professional, facilitating a smoother transition during a difficult time.
Mar 18, 2024
Should you buy/sell a property off-market?
Thinking of selling? You probably know the typical scene involves properties being listed, advertised, and showcased through open houses. However, a different, quieter path exists for homeowners and buyers alike, offering exclusivity and a smoother journey from listing to purchase. This is the off-market sale, a unique approach where properties are sold without public listings, broad advertising, or the traditional open house fanfare. Understanding Off-Market Sales. The essence of an off-market sale lies in its discretion and exclusivity. According to Damian Collins, Managing Director of Momentum Wealth, the fundamental difference in off-market is the absence of public marketing. This private nature makes off-market deals more exclusive and potentially less stressful, as the selling and buying process is not exposed to the broad public. However, Collins also notes that buyers must understand market values and remember that the asking price in off-market deals is not publicly tested. In other words, don’t automatically categorise an off-market property as a bargain… Why Choose the Off-Market Route? Cath Hart, CEO of REIWA, points out that privacy concerns, avoiding the hassle of preparing for home opens, and the luxury of waiting for the right offer are among the top reasons people opt for off-market sales. Sellers might not want the public to know they are selling or wish to test the market discreetly to see where buyers see value without the pressure of a formal listing. Pros and Cons for Buyers and Sellers. Off-market sales have advantages and disadvantages for both parties. For buyers, a key benefit is accessing exclusive opportunities that aren't available through conventional channels, along with a more personalised and flexible negotiation process. This can lead to more favourable terms for the buyer. However, the lack of advertising means potential buyers may be unaware of the property's availability, reducing the competition but also the visibility. For sellers, a key “win” is the lack of hassle regarding marketing and advertising efforts. This makes listing generally more affordable. However, this also means the property’s visibility is far lower, and the home may not sell as fast as a result. The Importance of Trust and Due Diligence. Off-market transactions call for a high level of trust between the buyer and seller. Collins warns that the negotiation process might lack the transparency of advertised sales, emphasising the importance of due diligence and professional expertise to avoid overpaying for a property. Going Off-Market? Let Us Help With the Tax Stuff For those looking to buy or sell outside the public eye, understanding the nuances of off-market transactions is key to navigating this less-travelled road successfully. For example, do you know what your tax obligations are here? We’ll help you make the most of off-market real estate deals and give sound advice around the tax implications. Get in touch to get started.
Feb 16, 2024
Home Buying & Selling Contracts: Understanding Clauses
Buying a home (or selling one) is one of the most significant decisions in life. Amidst the excitement, it's essential to approach the process with a critical eye — understanding the intricacies of your buyer’s or seller’s contract is paramount. We’re going to explore the importance of clauses, their role in protecting you, and the necessity of legal comprehension in the homeowner journey. The importance of clauses. When examining a home contract, it's not uncommon to ask for modifications before finalising the deal. You’re entitled to do so, and your real estate agent may even advise it. Including specific clauses empowers you to address concerns and ensure inspections or necessary fixes are completed before ownership transfers. These may include inspections for structural integrity, termite assessments, or verification of council approvals (particularly critical in WA). The role of real estate agents. While you can propose clauses as a buyer, you can’t breach legal requirements. Real estate agents typically aid in safely incorporating these clauses into the contract, offering guidance on pertinent additions. Real estate companies commonly provide standard forms for additional clauses, streamlining the process. However, buyers often forgo legal counsel, relying solely on the agent's assistance. Agents, bound by ethical standards, should highlight crucial property aspects and propose standard conditions, such as ensuring the functionality of utilities and conducting structural assessments, but they don’t always. Make sure you know what you’re reading and agreeing to before you sign! You can add an extra layer of protection and scrutiny by seeking third-party legal advice on your contract. Understanding what you’re looking at is paramount as it’s common for misunderstandings may arise. For instance, a structural report only obligates fixes to structural defects, not cosmetic issues, and many people don’t know this until they’ve already signed. Legal considerations. Even if you’re an experienced home buyer or seller, understanding your contract's nuances is crucial because WA lacks a cooling-off period. This calls for thorough scrutiny before signing — after all, no two contracts are the same. Attempting to exit the contract by failing to secure financing is also prohibited. Once signed, buyers must diligently fulfill conditions to finalise the transaction. Understanding the risks. In navigating home contracts, a grasp of clauses and legal obligations is invaluable. Seeking legal counsel offers an added layer of assurance, especially for those unfamiliar with the intricacies of real estate law. Ultimately, informed decision-making is key to a successful home-buying journey.
Jan 21, 2024
Selling? Prep your home for the market, fast.
When getting your home ready for the market, there are several maintenance tasks you can prioritise to enhance the potential for a profitable sale. You’ll never get a second chance at a first impression, so it’s worth investing in the presentation of your property in the lead-up to your market debut. 1. Prepare for drive-bys. Whilst a “for sale” sign turns head, it’s the home’s exterior that’ll hold attention. Many people do a drive by on a property to see what it looks like externally before they organise an appointment to see the inside. That’s why it’s important to get the garden looking as good as possible. Mulch, weed, prune, and make sure the lawn and garden beds are looking good. 2. Prioritise outdoor living. Kitchens and bathrooms are always the main selling points, however, Australians favour an outdoorsy lifestyle. We love our backyards, patios, and outdoor entertaining areas, and these spaces are becoming a priority for home buyers. As a result, it’s only natural to prioritise these spaces when it’s time to sell — especially if you’re selling in the warmer months or the lead-up to summer. Make sure these are well-kept, tidy, and weed-free. If applicable, you could also add a fresh coat of paint. A beautiful garden (front and back) will go a long way too! 3. Less is more. This cannot be overstated — less is more. When it comes to home opens and private appointments, get rid of junk and clutter. Ensure your home is as tidy as possible so that people have the best experience of your home and can visualise it as their own space. A simple, minimalist look will always make a room feel bigger, as will letting in as much natural light as possible. 4. The small but obvious stuff. In older homes, there may be small imperfections that have crept up overtime. Things like water stains, full gutters, dirty light switches or door frames, little knicks in the walls and paint will draw the eye, so it’s good to fix these up if you can. You should also make sure all the lights are working and replace globes or get the electricals fixed if needed. 5. Some bigger stuff. Living in WA, our summers can be pretty unbearable at times. Buyers prioritise homes with good air conditioning, so fixing yours or installing a new one (or some ceiling fans) can add significant value to your property. Similarly, if you have a pool, make sure the pump and filter are working well, and the levels are correct. You want your pool to look amazing as this will be a huge draw card for families. You should also ensure your garden has great reticulation so the garden is looking its best and is manageable for future homeowners. 6. Manage pest problems or bushfire hazards. Depending on your location, you may need to ensure your house is adequately protected against fires or pest concerns. For example, if you live in the Perth Hills, bushfires are an added risk for your property. Some suburbs seem to have more issues with rodents or cockroaches, or have hidden issues like termites. A professional property inspector will pick up on these issues, so it’s worth sorting them out before your property goes to market. Do you know about the tax implications of selling your property? In the whirlwind of selling, it’s easy to forget about the tax involved. We can help! Talk to us about the tax implications of selling your home, including guidance on capital gains tax, exemptions, and strategies to minimise your tax liability. To talk about this and more, contact us today
Dec 17, 2023
Making the Right Property Investment Choice: Key Factors to Consider
Deciding on the best property to invest in involves a careful balance of your personal investment objectives and the features that make a property attractive to renters. This blog delves into several crucial factors to keep in mind when navigating the realm of property investment. Aligning Investment Goals with Property Type The success of a property investment largely hinges on how well it aligns with your financial objectives. If your focus is on generating steady income, properties like commercial real estate or townhouses can be lucrative due to their solid rental yields and manageable overhead costs. On the flip side, those seeking long-term capital growth might find value in properties with significant land components or those in areas earmarked for development. It's vital to avoid the common pitfall of investing in a property that doesn't align with your intended financial strategy. Rental Appeal and Property Features The attractiveness of a rental property to potential tenants is greatly influenced by its location and features. Properties situated near essential amenities like schools, lifestyle options (such as beaches or parks), public transport, and shopping centres often see increased demand. Additionally, properties that require minimal maintenance and offer spacious bedrooms tend to stand out in the rental market. It's also worth noting that a property's ability to cater to a broad range of tenant demographics enhances its rental prospects. Demographic Targeting and Property Selection Understanding the demographic appeal of different property types is essential in making an informed investment. For instance, certain types of dwellings like villas may attract those in the beginning or twilight of their homeownership journey due to their accessibility and affordability. Meanwhile, townhouses can be a draw for younger adults or small families, although considerations like stairs might become a factor with the arrival of children. Properties that offer a more universal appeal, such as three-bedroom layouts with multiple bathrooms, generally cater to a wider tenant base, which can be beneficial during varying economic conditions. Selecting the Right Property for Investment Selecting the right property for investment is a multifaceted process. It requires a deep understanding of your financial goals, the intrinsic qualities that make a property appealing to renters, and the ability to cater to the right demographic. By considering these key aspects, you can make a well-informed decision that aligns with both your investment aspirations and the market demand. Navigate Through the World of Property Investment Ready to dive into the world of property investment but unsure where to start? Our team is here to help you navigate the complexities and pinpoint the right investment property that aligns with your goals. Contact us today to take the first step towards a successful property investment journey.
Oct 22, 2023
Difference Between Buying Property as Joint Tenants or Tenants in Common
When you decide to purchase a property with another person, you're faced with a crucial decision regarding the type of ownership you want to establish. There are two primary forms of co-ownership: Joint Tenants and Tenants in Common. Both have distinct features and implications for the rights and responsibilities of co-owners, especially in the event of one owner's death. 1. Joint Tenants When two or more individuals purchase a property as joint tenants, they equally share ownership of the entire property. Key Features Equal Interest: Each joint tenant has an equally owned interest in the property. This means that no individual can claim a specific section of the property. Right of Survivorship: A standout feature of joint tenancy is the right of survivorship. If one joint tenant dies, their share in the property automatically passes on to the surviving joint tenant(s). This process bypasses probate, allowing for a smoother transition of property rights. Requires Mutual Consent: One joint tenant cannot unilaterally sell or transfer their interest in the property without the consent of the other joint tenant(s). Common Uses: Due to the right of survivorship and equal interest features, joint tenancy is a popular choice for spouses and de facto partners. It ensures that in the event of an unexpected death, the surviving partner retains the property without legal complications. 2. Tenants in Common As tenants in common, individuals own specific, distinct percentages of the property, which might be equal or different. Key Features Varied Interest: Tenants in common can own different percentages of the property. For instance, one can own 60% while the other owns 40%. No Right of Survivorship: Unlike joint tenancy, if a tenant in common dies, their share doesn’t automatically pass to the other tenant(s). Instead, it goes to their beneficiaries as specified in a will (or by the rules of intestacy if no will exists). Independent Transactions: A tenant in common can sell or transfer their portion of interest in the property to a third party without the consent of the other tenant(s). However, this can introduce a new co-owner into the arrangement. Common Uses: Given its flexibility, tenants in common is often favoured by business partners or investors. It's also suitable for friends or relatives buying property together, especially when they've contributed different amounts and wish to reflect this in ownership percentages. Deciding Between the two The decision between joint tenancy and tenancy in common should be made after careful consideration of your circumstances and long-term goals. It's vital to reflect on your relationship with the co-buyer, the desired flexibility for future transactions, and the inheritance plan. For instance, if ensuring that your share of a property passes directly to a child or another beneficiary upon your death is a priority, tenants in common might be more appropriate. In conclusion, understanding the implications of these ownership types is essential when co-purchasing a property. Both have their advantages and potential drawbacks. Regardless of the chosen arrangement, it's beneficial to consult with a legal professional to ensure the chosen structure aligns with individual intentions and offers the best protection for all parties involved. Your decision and it’s tax implications When co-purchasing a property and deciding between Joint Tenancy and Tenancy in Common, an accountant can offer invaluable advice and assistance when it comes to the tax Implications. For example, when selling a property, there may be CGT implications. We can help you understand how your type of ownership will affect your CGT liabilities, especially if the property appreciates in value. Additionally, if the property is rented out, the rental income may have tax implications based on the share of ownership. To talk about this and more, contact us today.
Sep 17, 2023
The importance of professional property management: insights & advice from Ascent Property Co.
When it comes to investment properties, maximising your returns is paramount, which is an area investors often struggle with. One way to achieve this is by enlisting the services of a professional property manager. Recently, Luke Langford, Director/Licensee at Ascent Property Co, sat down with Chris Brown, Senior Financial Adviser at Chapters Retirement Partners, to explore residential property management. They cover the key advantages of professional property management, the preferences of quality tenants, and essential questions to ask when considering property management services. Here's a closer look at their conversation. Follow Ascent Property Co on Instagram & Facebook! Chris: What are some key advantages for a property owner engaging professional property management when leasing a property? Luke: Professional property management offers many advantages for property owners leasing their properties — I’ll give you 10 off the top of my head. Expertise: Property managers possess extensive knowledge of local real estate markets, rental laws, and industry best practices, ensuring optimal rental pricing and tenant selection. Time Savings: Delegating tasks like tenant screening, maintenance coordination, and rent collection to professionals frees up property owners' time for other pursuits. Quality Tenants: Property managers rigorously screen potential tenants, reducing the risk of problematic renters and minimizing vacancy periods. Reduced Vacancies: With efficient marketing strategies, property managers attract tenants quickly, minimizing downtime between leases. Legal Compliance: Professionals stay updated on ever-changing rental regulations, helping property owners avoid legal pitfalls and potential liabilities. Maintenance Management: Property managers handle repairs and maintenance, preserving the property's condition and value while minimizing owner involvement. Rent Collection: Timely rent collection is ensured through streamlined processes, reducing the hassle of chasing payments. Tenant Relations: Property managers act as intermediaries, addressing tenant concerns, and handling conflict resolution professionally. Financial Oversight: Comprehensive financial reporting keeps property owners informed about expenses, income, and overall property performance. Peace of Mind: Entrusting property management to experts provides owners with confidence that their investment is being well-managed. Chris: Amazing! Just on your point about quality tenants, do you find quality tenants prefer to lease a property managed professionally? Luke: The short answer is “yes”, definitely. Quality tenants generally prefer to lease a professionally managed property and see the value in it. There are a few reasons for this. Firstly, reliability: professional property management ensures prompt handling of maintenance, repairs, and tenant communication, giving tenants reassurance. These properties are generally better maintained and have timely repairs which creates a better living experience. Another plus is efficiency. Experienced property managers streamline lease agreements, rent collection, and administrative tasks for smoother tenant processes. Dedicated management also offers tenants peace of mind because they can rely on managers to address issues during their lease and manage communications with the property owner, which can sometimes feel a bit awkward. Finally, property managers have an extensive knowledge of rental regulations and ensure legal compliance — that’s good news for both parties. Chris: What questions should you ask a property manager if you’re considering using their services? Luke: It's essential to ask the right questions to ensure your chosen agency aligns with your needs and goals. Obviously being in the industry, I’ve received just about every question you can think of. These are the topics I think it’s most important to ask about. Experience and qualifications. Services and fees. Tenant screening and placement processes. How rent collection and other financial aspects work. Maintenance and repairs. How communications (particularly, difficult conversations) are managed. How vacancy and marketing are handled. Property inspections — they’re frequency and what’s checked. If needed, the tenant eviction process. Legal and compliance aspects. Contract and termination. Asking questions in these areas will provide a comprehensive understanding of the property manager's capabilities and approach to property management, ensuring a good fit for you and your property. Chris: And if they choose to go ahead, what are some things a property owner can do to make their home more appealing and achieve the best rental return? Luke: Making your property appealing to renters involves aesthetic improvements and practical considerations. An obvious one is cleaning and repairing. Take some time to ensure the property is well-maintained, addressing any maintenance issues to create a positive first impression. This could be as simple as a fresh coat of paint — I always suggest neutral colours to enhance the property's appeal. Maintaining the exterior, landscaping, and entrance also makes the property more inviting via good curb appeal. A more expensive aspect to think about (but well worth it in my experience), includes modernising the home where possible. Consider updating features such as appliances, countertops, and fixtures to increase aesthetics and functionality. Kitchens and bathrooms are no different — if owners can afford to upgrade these key areas, they’ll attract higher-quality tenants. In saying that, understanding your target market and tailoring improvements accordingly is crucial for achieving the best rental return. Chris: Talk to me about property management fees. Are these fees normally a tax-deductible expense? Luke: Yes, property management fees are typically tax-deductible expenses for property owners. These fees are considered operating expenses directly related to the management and maintenance of your rental property. As a result, they can be deducted from your rental income when calculating your taxable rental profit. Chris: How can professional property management help when a property is to be sold with a tenancy agreement in place? Luke: Professional property management can be incredibly beneficial here. For starters, they ensure the existing tenancy agreement remains intact, providing a consistent rental income stream during the sale process. This includes documentation and lease transfer — managers handle the necessary paperwork to transfer the lease to the new owner. They also maintain communication with tenants, minimising disruptions and preserving a positive landlord-tenant relationship. Additionally, property managers are well-versed in local landlord-tenant regulations. They ensure that the sale process is conducted in compliance with these regulations, protecting both your interests and the rights of the tenant whilst ensuring all legal requirements are met during the transition. Explore the Ascent Property Co advantage Choosing the right property management team can significantly impact your financial outcomes. Ascent Property Co sets new standards in property management and currently offers a special introductory management package for new clients. To seize this opportunity, visit their website or reach out to Luke Langford directly on 0493 672 956 or at luke@ascentpropertyco.com.au. You can also speak with Nigel Parker on 9356 8033 or at nigel@ascentpropertyco.com.au. And, don’t forget to follow Ascent Property Co on Instagram & Facebook!