Determining depreciation for cash flow estimate

[Sdelectrix]

Hi all,

I'm a new investor looking to purchase my first IP, and I'm wondering how do I determine how much depreciation to factor in when I'm trying to estimate cash flow for a new H&L or new townhouse development? I assume it will differ with respect to land size/value, purchase price, quality and quantity of fixtures & fittings etc...
Any help is much appreciated!!

Sam

 

[Propertunity]

I assume it will differ with respect to land size/value,

No, you don't depreciate land.

...purchase price, quality and quantity of fixtures & fittings etc... Any help is much appreciated!! Sam

Yes, to a point. To get an accurate amount you need a QS (quantity surveyor), however as a rule-of-thumb, for a house on land say a 4,2,2 I'd allow about $15K of depreciation in year 1.

Cheers, Alan

 

[Sdelectrix]

Thanks alan,

So even using a rough figure for depreciation will give a reasonably accurate cash flow estimate? Both of my options are 3 bed 2 bath LUG.

Thanks again
Sam

 

[depreciator]

New house?

If you email me the construction cost (excluding land of course) and some information on the fitout specs I'll give you a rough estimate.

 

[alexlee]

If your cashflow is that tight, don't rely on depreciation estimates.

Have a more conservative buffer instead.

 

[Sdelectrix]

New house?

If you email me the construction cost (excluding land of course) and some information on the fitout specs I'll give you a rough estimate.

Thanks, that would be great I'll try get some more details.

The cash flow is not an issue, I'm more trying to determine how accurate the depreciation figure needs to be so as not to throw out the resulting cash flow estimate so far that it affects my decision to buy. Hope this makes sense, I can clarify further if needed.

Thanks again