Buying ex-hall-renov.abandoned

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From: Fedora Tarsitano


We have just inspected a property which was a hall and where the owners had attempted to turn into a residence. It has been abandoned at the stage where we have holes in the ceilings,demolished kitchen, tiles removed etc.etc.At the moment it is a shell.
If we were to buy it, we would need to bring the premises back to it's original use. Put a new kitchen where the old one was ripped out, floor coverings, tiling,plaster repair work, new ceilings etc.
Tax wise - what category would this work fit into...capital expenditure or repair? My husband would lease it to me for my business.
I should have listened to my Mum and become an accountant!
cheers.
 
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Reply: 1
From: Glenn Mott


If you were to buy and renovate straight away, I would say that everything would be capital in nature.

If you were able to rent the property for a period of time and complete repairs/renovations during this period, some of the costs would be 100% depreciable.

Renting the property could include Hubby buying and renting property to you..for a greatly reduced price due to the condition.

Please seek the advise of your own accountant.

Glenn
 
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Reply: 1.1
From: Simon .


Just an idea.

Many commercial tenants are responsible for all outgoings including repairs and renovations to the rented business premises. If you have a lease in place could the repairs become a business expense for you?

What do you think Dale?


Simon Macks
Mortgage Hunter
0425 228985
sjmacks@smartchat.net.au
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi Simon!

What an excellent suggestion!!!

The costs will still be capitalised though and depreciable rather than an immediate tax deduction, I am afraid.

I like the way that you think though

Dale
 
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Reply: 2
From: Geoff Whitfield


Fedora,

Please take my comments with caution. I'm just an amateur in this game.

From what you're saying, I am guessing that you're wanting to borrow to buy, and then spend your own money to renovate. And you're hoping to claim your costs as a tax deduction, as they are real "out of pocket" expenses.

As people have pointed out, the costs of improving, are, in effect, the same as the capital expense of buying.

Is it possible for you to get a loan which covers the improved state of the property?

Some institutions apparently do this, I believe, but I haven't tried yet.

So you get your valuer to give you two prices- one which is the property in its present state. The other covers the way you want it to be- with very clear specifics.

Your institution may lend you on the improved value.

And I'd like feedback on people who have tried this and failed or succeeded.
 
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