General Repairs Versus Added Improvements
- Friday, 12th Jun, 2015 by Super User
As a home owner you understand the importance of ensuring that your property is well maintained and that it continues to present itself in its best light. If you are an investor this is doubly true. An investment only proves to be a good one if you do not let your asset get so run down that it prices itself way below its market value.
This is why it is so important that we conduct regular inspections of all our rental properties. The advantage is that we can conduct an unbiased visual inspection.
Yes, we are able to ensure that the tenants are looking after it as they should. We are then able to combine our results with any reports the tenant makes. From here we are able to deduce what needs repairing or replacing and what can be put on the back burner.
The Difference Between a Repair and a Capital Improvement
Repairing or even totally replacing something that existed on or in the property at the time of the lease commencement will allow an owner to claim against their tax returns for the expense of that repair or replacement.
When you enhance or improve the property you can claim any depreciation that is applicable immediately. However, you are only able to claim the actual expense of any improvement as part of any capital gains claim, should you ever sell it.
Here are some examples of maintenance and improvements:-
Cleaning up the driveway with same material – maintenance;
Vamping up from gravel to concrete driveway – capital improvement;
Replacing damaged or rotting existing timber retaining wall with more timber – repair;
Building besser block wall in place of timber wall – capital improvement;
Adding a carport or shed – capital improvement;
Replacing hot water system with similar size, model – repair;
Upgrading from electric hot water to solar hot water – capital improvement.
Keeping it Real
Focus Property Management understand that an investor may not want to put all their rental proceeds back into the property and some will want to use it to improve its value for sale at a later date.
It really depends on the strategy, you as an investor, are intending to take. This is one of the important points we will clarify to ensure you are getting the service you asked for.
It is obviously important to ensure all our properties are well maintained, safe, and secure and these three things will always remain a priority.
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