Maximising the financial rewards of owning an investment property hinges on a few key elements all landlords should be taking into consideration.
Property investment has been a widely recognised as a way of achieving financial security, with many Aussie investors using their rental properties to secure their financial future for themselves and their families.
And since the current demand for rental properties remains high, with a national vacancy rate of just 1.5%, many landlords have the potential for long-term financial gain.
Property investment can be lucrative, if you properly understand potential savings. Picture: Getty
But let’s be honest: managing properties can be a difficult task at times, especially when it comes to balancing expenses. It often requires the mindset of a savvy business professional.
However, there are plenty of practical ways to save money on investment properties – from claiming expenses to installing solar panels, here’s where you can save a penny.
How to save money on your investment property
1. Claim borrowing expenses
It’s important to keep track of all the expenses related to your investment property, especially loans used to purchase or maintain the property.
The government allows landlords to claim tax deductions for the interest charged on these types of loans, along with any loan application or mortgage broker fees.
This can all significantly reduce your tax bill, helping you save money and maximise your profits.
2. Negative gearing deductions
Negative gearing allows you to offset any losses made from your investment property against your taxable income, reducing your overall tax bill.
So, if your total expenses for the investment property is $20,000, for example, and the total rental income is $15,000, you’re able to offset the difference against your taxable income.
And so, your taxable income is automatically reduced by $5,000.
This can be particularly beneficial during times when your property is vacant or rental income is lower than expected.
3. Install solar panels
It’s always worthwhile to invest in your investment, especially when you can take advantage of government rebates, while simultaneously boosting the desirability of your home for potential renters.
In fact, “solar panels for renters” is ranked 13th out of the top 20 searched keywords for April on realestate.com.au.
In Victoria, the State Government, through Solar Victoria offers rebates of up to $1,400 to eligible landlords towards the cost of installing solar panels on their rental properties.
To help further cover out-of-pocket installation costs, there’s also the option of an interest-free loan for the same amount.
In addition to the Victorian Government’s rebate, the Federal Government also offers a Small-Scale Technology certificates (STCs’) incentive, which could see an average of $2,676 taken off your new solar system bill.
Landlords can benefit from installing solar panels whether their investment property is in the city, or in the suburbs. Picture: Getty
And the best thing is, the remainder can be depreciated as a tax-deduction depending on your circumstances.
“For rental providers, it’s a selling point to attract renters as the property will have lower bills,” Stan Krpan, the CEO of Solar Victoria, says.
“It’s also a good investment for their property and can result in stable renters who will be a dependable source of income.”
“For renters, there will be lower power bills and peace of mind that they have more control over their energy costs and their impact on the environment,” Mr Krpan adds.
On the topic of lower electricity bills, a 2022 Residential Consumer Omnibus Survey carried out by realestate.com.au found 55% consumers now believe that energy efficiency is extremely important – a 17% jump on the year prior. And in the last 12 months alone, more than 90% of searches for ‘energy efficiency’ on realestate.com.au have been about solar panels.
Respondents were most concerned about the rise in electricity costs, another reason installing solar panels can pay off for landlords.
“People want to be part of the change to a net zero economy, and we see homes with solar panels and electric appliances powered by renewable energy becoming the future norm across Victoria,” Mr Krpan says.
Over time, assets such as furnishings in your investment property can lose value.
However, you can claim tax deductions for this depreciation, which can add up to significant savings.
The rationale here is that some assets are considered to have a limited useful life, such as carpet, decking and other fixtures within the property.
Certain items in the home aren’t designed to live forever. Get to know their depreciation value for even more savings. Picture: Getty
These features do not increase in value over time, and will eventually need to be replaced, resulting in a loss value for the landlord.
To ensure accurate calculations, consider acquiring a professionally-prepared tax depreciation schedule.
And don’t forget to claim the cost of getting the report as an expense at the end of the financial year.
Further to that, “solar panels for renters” is ranked 13th out of the top 20 searched keywords for April on realestate.com.au.
And in the last 12 months alone, more than 90% of searches for ‘energy efficiency’ on realestate.com.au have been about solar panels.
“People want to be part of the change to a net zero economy, and we see homes with solar panels and electric appliances powered by renewable energy becoming the standard across Victoria,” Mr Krpan says.
5. Master the art of negotiation
As a landlord, every cent you save counts, and so knowing how and when to negotiate becomes critical. Here’s where you can make the most impact:
Negotiate fees with the real estate agency managing your property.
Regularly review your mortgage and renegotiate your interest rate with your lender or mortgage broker.
Negotiate with your tenants on rent increases or lease renewals.
Where appropriate, perform minor repairs and maintenance yourself. However, don’t attempt large or complicated jobs yourself as this could lead to costing you more down the track. Never risk your tenants’ safety, or your own for the sake of a few dollars.
When you need to hire a tradesperson, speak to your property manager as they may have trusted tradespeople in their directories. Be sure to gather a few quotes before committing to one.
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