Sunday, February 15, 2009
How not to repay the depreciatin you have claimed when you come to sell the property
Draftsman
building design + townplanning
t. 9326 1949 f. 9326 2640
Director:Joseph Lo Giudice
based in : Essendon
western, northern suburbs
My Environment
You can find out about:
world and Australian heritage sites
parks, elevation and landforms
soil and vegetation cover
vulnerable and endangered plants and animals
pollution risks and where you can recycle waste oil
wetlands, water catchment and conditions
weather, average temperature and rainfall.
How to use My Environment
1. Visit My Environment which can be found at the Department of Environment Water Heritage and the Arts (DEWHA) website.
2. Enter the property address details in the search field on the right hand pane. (Hint: do not enter the type of street into the street field, rather, use the drop down menu. If you have a flat or unit number, use only the street number.)
3. Select the type of report you want to create.
4. Select "Create Report".
Friday, January 23, 2009
Location tops tenants' list of priorities
Location is the main criteria for tenants seeking rental accommodation, according to a survey by Matusik Property Insights. Tenants desire, above all else, to be close to work, public transport and facilities such as shopping.
Second on tenants’ wish list is the quality of the building or the area, followed by design features of the property such as size, number of bedrooms and yard or balcony space.
The actual rent ranks fourth on tenants’ list of priorities. Fifth is the security and amenity of the immediate neighbourhood and finally tenants would like a view.
The Matusik survey also asked tenants about the features for which they were willing to pay a premium. No.1 on the wish list is a study, preferably a separate room but a study nook will suffice. Broadband internet access is also important. “Many renters are younger people undertaking a tertiary course, so being able to study at home is important,” Matusik says.
No.2 on the list of items tenants will pay more for is a well-located, well-equipped and functional kitchen, preferably will ample storage space. “Renters, even the younger crowd, can cook and entertain at home,” Matusik says.
No.3 is a proper en suite, directly adjacent to the bedroom. “Given the rise in sharing – just under half of our survey respondents share their rental accommodation with an unrelated person – having a private bathroom is a must,” Matusik says.
Tenants will also pay more for a view, bedrooms large enough to fit a queen-sized bed, and secure off-street parking (preferably under cover).
The Matusik survey found six out of ten would pay up to 10% more in rent to get these features, while another one-fifteh saying they would pay a 20% premium.
Tenants will pay a premium for ….
1. Study
2. Quality kitchen
3. En suite
4. Views
5. Large bedrooms
6. Secure parking
Tuesday, December 30, 2008
Saturday, November 15, 2008
Privatepoint.com.au
http://www.privatepoint.com.au/how-it-works/
Both PrivatePoint and Old Listings are powered by SuburbView.
http://www.suburbview.com/
Check the blog page for new sites they have developed:
http://www.suburbview.com/blog
Friday, November 14, 2008
Sunday, November 2, 2008
Are property seminars and publications tax deductible?
Monday, September 15, 2008
Wednesday, September 10, 2008
Council valuations vs. independent valuations methods
- By Greville Pabst
- Published 18/10/2007
The valuation low-down...
There is no doubting the confusion surrounding the differences between a council rates notice valuation and an independent property valuation. Some property owners swear by their rates notice valuation, even though they may not realise they are conducted every two years. Whereas, some are property savvy and understand the property market is prone to fluctuation.
The council classifies the properties within their municipal area based on various features including type of construction, use, building size and land area.These features are then weighed and analysed against sales of each type of property from 3 months before and after the re-valuation date (the next one being January 2008), within the same municipality to determine the market value.
The purpose of a council rates valuation is to divide the whole budget of the council equitably between the rate payers – being owners of commercial, residential and industrial properties.This is done by applying a rate in the dollar by the capital improved value of the property.Other information gathered by the valuation process is used by other government departments for the collection of say, land tax.
The final analysis of each subject property ends up on a rates notice issued to the property owner and is broken down into three different values:
1.Site Value
2.Capital Improved Value (Land Value & Value of Improvements)
3.Net Annual Value; which under the relevant legislation is calculated at 5% of the CIV.The NAV is meant to be an indication on the rental value of the subject property.
The accuracy of the valuation will depend on the diligence of the council valuation staff.Some councils pride themselves on delivering up the most accurate valuation possible, whilst others are happy to appear equitable between all rate payers.
It must be noted that these valuations are done every two years but can only be accurate for a short period of time after the relevant date.For example, the last valuation was 30th January 2006, hence being valid for only a short time thereafter. As at today's date, areas close to the CBD (inner circle), have seen the market values of property drastically understated on their rates notice; whilst areas in the outer circle such as Werribee, may be overstated – purely due to the direction the market has moved since the last valuation date.
Other important things to note are that only approximately 10% of properties in a given municipality are inspected on a rotational basis for a re-valuation and there could be 40 -50 thousand homes in only one municipal area.
Contrary to council rates notice valuations, properties valued by an independent property expert are conducted for different purposes such as refinancing, investment portfolios, family law, body corporate to name a few.
The independent valuation process starts with a physical inspection of the property. The valuer walks around and through the property taking measurements and note of the number and type of rooms, fixtures and fittings, and improvements. The valuer then employs three methods to further analyse the property in order to come up with a value range: direct comparison, summation, and capitalisation of net income methods.
The field of property valuations is often described as an art and not a science, as it takes into consideration so many tangible and intangible aspects of a property and its surrounds. Valuations are a professional opinion based on available evidence; valuers do not set new benchmarks. They must be guided by what has sold recently, that is, within the past six months.
The direct comparison method involves researching recent sales of similar properties in the immediate surrounds, referred to as 'comparable sales'. The subtle and not so subtle differences are taken into consideration to determine the extent to which these comparable sales can be used as a guide to the value of the subject property. In this way, apples are compared with apples and necessary adjustments can be made for the bruises.
The summation method is the land value plus the depreciated value of improvements, which comprises the dwelling plus ancillary features such as garage, pergola and swimming pool. Land value takes into consideration size, shape, topography, slope, location and surrounding infrastructure and amenities. The value of improvements incorporates the style, age, architectural features, layout, number and purpose of rooms, and renovations in addition to the overall appearance and condition.
The valuer may also check these values by way of capitalising net income. This involves applying an investment yields to assessed market rental of the property to derive the current market value. This method is commonly used when valuing investment properties.
When refinancing or selling a property, one may ask - which is the preferred valuation to rely on?Given the fact that council rates notice valuations are conducted only every two years, and only 10% of properties within any given municipality are physically inspected, it is no doubt that an independent valuation is the way to go.Independent valuations are conducted on an as-needed basis and are reflective of the 'present'.Furthermore, banks and lenders will only accept valuations performed and signed off by an independent property expert listed on their panel of valuers.
Building & pest inspection - www.buywiseinspections.com.au
source: www.homeiown.com
Pre-purchase inspection: things that go wrong and how to get it right
I recently had two building and pest inspections done by two different companies. The price was almost the same – but the difference in quality of service was amazing.
The first company responded to my booking promptly and arranged for the inspection to be carried out on the next day. I was promised that in case they find termites I will get a call immediately. Of course I was hoping that they wouldn’t because I really had my heart set on that property, but guess what – they did. Their inspector called me and let me know that there were signed of infestation and that the report will have the details.
Naturally, I was anxiously waiting for the report, checking my email every hour. At 12 in the afternoon I finally lost my patience and called the company only to get “Yes, we’re working on your report, it will take another hour to get it ready and, by the way, we have lost all the pictures taken during the inspection because of a faulty camera”. Can you imagine how furious I was! The only reason why I hired that company was because the sample report they had online looked really good, many large pictures with all the problematic spots circled to be easily seen.
Of course after such a fiasco I wasn’t going to hire them ever again. Luckily I found another company – and this time I will mention a name because I would recommend them to anyone: BuyWise.(http://www.buywiseinspections.com.au/) They are real professionals. The inspection was quickly booked for me by a very friendly lady, I got to choose the day and the time, they let me be present during the inspection and they were actually half an hour earlier on site than we scheduled! Pest inspector had a specially trained dog with him - what a brilliant idea to train a dog to detect termites! The building inspector didn’t leave any of my questions unanswered and only left when I was completely satisfied. I got the report early on the next day, great pictures and even an estimate of costs for all the repairs needed. I would definitely use their services again.
What's cheaper than building your own house
source: www.homeiown.com than building your own house
If you are on a tightest budget and even building your own house is too much for your pocket, there is another way. You can buy a block of land and relocate someone else’s house – how’s that for an idea?
The advantages are obvious – it’s cheaper than building a new house (you can save up to 50%), it’s faster – removal can be finished within a couple of weeks, and often the quality is better because many of the older houses were built using higher quality materials than those used today.
Apparently there are many people who sell the houses they own for removals - to avoid paying demolishing costs. I saw several houses for sale in the Trading post (http://www.tradingpost.com.au) for $1000 – $2000, plus the removal of a house costs, about $30000 - $35000. The way it is done, you hire a removal company and they handle everything – remove the roof, cut the house in sections of transportable size and then move the house to your site where they install and re-join it, as well as put a new roof over it.
Here is a couple of links to house removal/relocation companies I found:
http://www.khr.com.au/relocating
http://www.drakehomes.com.au
http://www.davidwright.com.au
6 types of houses in Australia you must know about
Victorian 1840 - 1890
Federation 1891 - 1913
War 1914 - 1945
Post-war 1946 - 1959
Contemporary 1960 – present. There are 2 types, “project style” – meaning a house was built from a common plan and “custom built” - meaning a house was built using a unique design.
6 ways to sell your home for more
A recent Sydney Morning Herald article points to this recent report from Archicentre - the results from a poll of over 800 architects to see what the trends were in renovations. A look at this report could help you decide which home improvements will increase the value of your home, and which will not necessarily break even.
A few other ideas that don’t involve costly renovations:
- mow the lawn; tidy the outside of the house - in times of mortgage stress, a photo of a house where the backyard is untidy suggests that the vendor is desperate to sell, and that they would take a lower price.
- clean and tidy the bathroom - it’s a room where someone who is inspecting the house will quickly sense how well the rest of the house has been looked after.
- remove clutter: rent some storage if you need to - a house that is full to the rafters gives a sense of being smaller than it actually is: if you clear out some of your belongings, you will instantly create more space.
- clean the house thoroughly - in keeping with tip number 1, this will present your house in the best possible light.
- air any rooms that need airing - though it won’t come up in the online listings, someone who inspects your house in person will be able to tell that some rooms have a musty odour. This is especially worthwhile if you have pets.
- add some energy-efficient light globes - with so many people looking to save the planet, it doesn’t hurt to send the message to potential buyers that you are interested in doing your part.
Friday, July 25, 2008
18 Jul 08 Webinar - renovation due diligence
Cosmetic reno; getting in and change the look and feel
Advance reno: change structure
Add value for as little money as we can
Buy100k + 30k reno, revalue @160k, and borrow against the new value to get new capital for the next project
End sale value: the biggest mistake is overestimate the end sales value
The selling agent of the property you are buying should have an idea what the end price is, then go and look as many house as you can to confirm the end price.
Go to another angent, pretend to buy the end property in the area, then you get truer picture, as agents talk differently to seller and buyers. If it’s a small town, get yoru friend to do it.
Dean doesn’t factor in any decline and growth in projecting end price. However he is conservative in budgeting the end price.
It’s difficult to find reno proj with profit in it. Need to be very careful.
Because there is a trend of people doing reno, people are starting to pay premium for unrenovated houses. Therefore you need to be able to negotiate better deals to ensure there is a profit in the end. Though now there are people who are willing to drop the selling price a bit.
Some reno proj are better than others. A perfect reno project is somthing not too old in a decent area.
Something quite old with structure prob that needs new stumps or have invisible prob such as wiring is no good.
Look for where you can add a room w/o extension.
Emotional area of property cause greatest value appreciation. Kitchen and bathroom are major areas where you can spend money. The danger in reno is ppl spending too much inside and little outside. You need to get ppl inside first. Dean only buys units if they are a block so he can change the outside.
Get building inspection to find things that you can’t see.
Restumping, rewiring, reproofing does not add value. Be diligent ,detailed and thorough in the costing . Make decisions about what you need to change before you buy.
Q:How to separate the ones will truly add value from those just “nice to haves’?
A: It comes down t research. Before you buy, decide who is your market and target that what is needed. Keep in mind what’s selling fast. Look for the style of the house in the area that’s selling fast and look for something that’s similar. Ask REA what price range sells best.
Q:What are the ways of cutting down unnecessary reno cost?
A: If you know the target market well and look at other properties then you know what’s needed. Determine what you need to do to fit that target market. For every dollar you spend, you need to get a greater value back. You don’t have to replace the whole kitchen and bathroom.
Some reno work requires permit. Cosmetic reno does not need permit. Structural change such as stump, roof, and walls generally need permit. Painting, change tiles and carpet does not need permit. Rules and regulations are different in every area. Best to check with local building surveyor.
Unexpected holding costs are the biggest blow to reno prj. Early access is an advantage. Minimise the down time in the project. As soon as one tradesman finish, get the next one in . Plan the time for the trades people.
Some times it is hard to get to finance reno prj. Renos are cash intensive. If you can get a permit for a structural, then you can get a loan from the bank. As soon as you finish reno, trying to get the value.
It’s important to know how it hinges together. It’s good to do it first time yourself to understand how every job hang together.
For people who plan to do multiple projects at once you need a system to manage it.
Q: How to estimate material cost?
A: Go to bunnings;
Q: How to estimate labor cost?
A: For most trades like tile carpet, painting tile you should be able to get accurate quote. Plumbing labor is hard to estimate. It comes down to the complexity of the prj. Get a plumber through the property and let him know what needs to be done. He should be able to give you an idea how much it costs. Then add 10 to 20% for unexpected things. You can use your home as a test case to get an idea what everything costs.
Dean budgets Cosmetic reno on 10% initially. Later he based it on the profit that can be achieved.
Q: How do you separate emotion from the numbers in reno.
A: Make sure to meet the requirement of the target market.
Factor in a handy-man’s time for bits and pieces. Get a quote from a handy man re hourly rate
Current market:
Mixed messages out there. We are at a point of change. Uncertainty needs to be factored in when you buy.
Do your due diligence and be prepared to walk away if the numbers don’t stack up. Know your market, know your target market.
Wednesday, July 23, 2008
Property sub-division and capital gains tax
Subdividing land – will you have to pay capital gains tax?
If you own a block of land and are thinking of subdividing it into two or more separate blocks, remember this can affect the amount of capital gains tax (CGT) you pay when you dispose of the subdivided blocks.
The process of subdivision will not result in any capital gains tax liability as long as you continue to own the subdivided blocks. However, you may make a capital gain or capital loss when you sell or give away any of the blocks.
You also divide the costs incurred in acquiring and subdividing the land across the subdivided blocks on a reasonable basis.
You may know that your home is usually exempt from capital gains tax due to the main residence exemption. If you subdivide land surrounding or adjacent to your home, it does not qualify for the exemption if you sell it separately from the home.
Example
Kim bought a house on a 0.2 hectare (or 2,000 square metre) block of land in June 2003 for $350,000. The house was valued at $120,000 and the land at $230,000. When purchasing the property, Kim incurred $12,000 in stamp duty and legal fees. Since the purchase, Kim lived in the house as her main residence.
Kim found the block was too big for her to maintain. In January 2005, she subdivided the land into two blocks. She incurred $10,000 in survey, legal and subdivision application fees and $1,000 to connect water and drainage to the rear block. In March 2005, she sold the rear block for $150,000.
As Kim sold the rear block of land separately, the main residence exemption does not apply to that land. She contacted several local real estate agents who advised her that the values of the front and rear blocks were the same. Therefore, Kim apportioned the original cost of the land ($230,000) equally between the two blocks ($115,000 each). Kim incurred $3,000 legal fees on the sale.
Kim works out her capital gain by adding together costs she incurred that form the cost base of the rear block, and taking this amount away from the sale price, as follows:
Cost of the land $115,000
50% of $12,000 stamp duty and legal fees on purchase $6,000
50% of the $10,000 cost of survey, legal and subdivision application fees $5,000
Cost of connecting water and drainage $1,000
Legal fees on sale $3,000
Total cost base $130,000
The capital gain on the sale of the rear block is calculated as follows:
Sale Price $150,000
Less
Cost base $130,000
Capital gain $20,000
As Kim owned the land for more than 12 months, she can reduce her $20,000 capital gain by 50%, after deducting any capital losses she made from other assets.
When Kim sells her home, being on the front block, she will get the full main residence exemption for it if she uses it solely as her main residence during all of her period she owns it.
Special rules
If the block you are subdividing was purchased or given to you before 20 September 1985, capital gains tax does not generally apply. However, if after that date, you had a building (such as a house) constructed on the land or made major renovations to the property, they may be subject to capital gains tax when sold.
You may make a profit from the subdivision and sale of land which occurred in the ordinary course of your business or which involved a commercial transaction or business operation entered into with the purpose of making a profit. In this case, the profit is ordinary income. If you need advice about this, you should seek help from a registered tax agent.
More info:
The Tax Office has publications and tools available to help you. The new capital gains property exemption tool is available on the Tax Office?s website http://www.ato.gov.au/ and helps you work out what proportion of any capital gain or loss is subject to CGT when you dispose of the property. If you have any questions relating to your circumstances, you can call the Tax Office on 13 28 61.
More information The Tax Office booklet You and your shares (Nat 2632-6.2004) is available at http://www.ato.gov.au/ or, for a paper copy, call 1300 720 092.
Friday, July 11, 2008
Victoria planning schemes
http://www.dse.vic.gov.au/planningschemes
Maroondah
http://www.maroondah.vic.gov.au/MaroondahPlanningScheme.aspx
http://www.maroondah.vic.gov.au/SubdividingLand.aspx
http://www.dse.vic.gov.au/planningschemes/maroondah/home.html
Process:
When find the land, ring the council to check the zoning to see if it can be subdivided
overlay(special planning controls for a local area) requirement: The minimum lot size for subdivision is 864sqm
Firstly get the block surveyed then lodge the application
The council will then refer the plans to various service authority which include Yarra Valley Water, Melbourne Water, Gas and Electricity suppliers, Telstra, VicRoads and CFA, and they will make comments to the council
If all ok, council will then issue statement of compliance for obtaining separate title
From the surveyor lodge the application to issuance of statement of compliance can take up to 6 months.
Application can be lodged before settlement after signing the contract.
Thursday, July 10, 2008
The Tax Office is taking a tougher stance in a bid to keep self-managed funds in line.
http://smallbusiness.smh.com.au/growing/tax/now-you-can-dob-yourself-in-912280922.html
The Tax Office this week issued its long-awaited report on contraventions in self-managed super funds. The report lists the errors made by the trustees of SMSFs that must be reported by auditors of super funds.
Previously, auditors could use their professional judgement on whether they advised the ATO of infringements of the super regulations.
The contravention report is an indication of the tougher stance the ATO will take in performing its role as the regulator of SMSFs, and should be a warning to trustees to fully discharge their duties.
Auditors are now required to report all breaches of regulations in the first year of operation of SMSFs. The accounting and audit cost of SMSFs will rise with this requirement.
The ATO has said this step has been taken to gain a better understanding of how trustees are discharging their duties. They will use this information to better target educational and enforcement activities for SMSFs.
The contravention report is set out in a series of seven questions that, when answered in the affirmative, require the breach of the regulations to be reported. The questions are:Did the fund fail to meet the definition of a SMSF?
As at the end of the financial year, is the SMSF less than 5 months old?
Has the trustees previously received advice of a contravention that they breached again?
Is there an identified contravention from a previous year that has not been rectified at the time the audit is being conducted?
Did the trustees fail to meet a statutory time period by more than 14 days?
Was the total value of all contraventions greater than 5% of the total value of the fund's assets?
Was the total value of all contraventions greater than $30,000?
A super fund meets the definition of an SMSF if it has no more than four members, all members are trustees or directors of a trustee company, no member is an employee of another member unless they are a relative, and trustees are not paid for performing their duties as trustees.
The instruction guide issued to auditors on how to complete the contravention report lists 20 reportable regulations and sections of the act.
The breaches of the super rules most likely to be reported will be failing to segregate super assets from personal assets; buying assets from members; incorrect payment of benefits to members; and failing to provide documents to an auditor within 14 days.
This last regulation is the one that many trustees breach because of the low priority placed on providing documentation to auditors on time.
The inclusion of value limits on breaches of the regulations is a welcome refinement of the contraventions reporting requirements.
Without the $30,000 total value limit, and the 5% of total asset value limit, every simple administration error would have been required to be reported.
The combination of the audit contravention reporting requirements, and the declaration that must be signed by all new trustees of super funds stating that they understand their responsibilities and duties, should result in a greater level of compliance by trustees of SMSFs.
In the past, the ATO has preferred to have mistakes fixed, rather than classing the fund as a non-complying fund. When this occurs, 46.5% of the super fund's assets are taken as a penalty.
If the contravention reports provide evidence of trustees wilfully breaching the regulations, this penalty ay be imposed more regularly.
Questions can be emailed to max@taxbiz.com.au.
Tax for Small Business, A Survival Guide by Max Newnham, is now available in book stores.
