Depreciation

[barbs00]

Hi All,

I am wondering how much depreciation one can claim for an IP.

I know it is very difficult to tell without getting a proper report from a quantity surveyor but I am just after a rough idea so I can work out roughly what the purchase of an IP will cost me each week.

I don't want to buy and IP, get the report and be surprised that the depreciation is less than I thought.

If we take the below properties as examples can anyone give me a rough guide as to how much depreciation one may be able to claim :-

1.
Old house with recent renovation
http://www.realestate.com.au/property-house-qld-holland+park-117384135

2.
Newer house without renovation (assume older than 1985)
http://www.realestate.com.au/property-house-qld-holland+park-116739399

I know its a difficult question to answer but I am just after a rough guide at this stage.

Anyone got a similar IP to these? What do you claim each year?

Thanks,

 

[mumbai]

If depreciation is the only factor in your decision to purchase an IP, you need to rethink your strategy.

 

[barbs00]

Omg Rajnhets, it is not the only factor I am considering. Nevertheless it is a good idea to have an idea about it so you can have a rough idea what an IP will cost to hold.

 

[Paul@PFI]

Most QS firms are happy to discuss an estimate for each property. Its in their interest to develop that relationship so you do come back for a report.

Call BMT or Depreciator. They are both very large and reputable and likely to be very helpful.

 

[depreciator]

There are some free calculators around, but they ask very few questions and are really only of use with 'vanilla' properties e.g. newish project homes. They struggle particularly with renos.

With a pre 85 built property with no renos, the only depreciation is in the Assets: appliances, HWS, blinds/curtains etc.
So it all gets down to how much of that stuff there is and what condition it is in. If it's a decent size house and it has carpet, a dishwasher, aircon and stuff like that, depreciation in the first full year should be around $2,000. Less in subsequent years.

That other place has had a decent reno. Let's say the structural component of the reno was $50K. At 2.5%pa that's $1,250 per year (first year is pro rata).
On top of that is the depreciation in the Assets. They will be newer, but from the pics there is no carpet, DW, blinds, aircon. So let's say there is maybe $2,500 in the first full year in them. That means perhaps $4,000 in the first full year.

They're pretty conservative figures, obviously.

As rajnhets said, depreciation is useful and assists with holding costs in the early years of ownership especially, but it shouldn't be a big factor in a purchase decision.