Repirs to a new, but damaged IP.

Hello All,

I am currently purchasing two IP's next to each other.

Number one is in good condition but needs painting and a car port.

Number two is a mess inside.

Every door has holes in it, same for walls (some of the holes are heads size and height - the mind boggles when you think of how they might have been made).

Carpets are dead and my intention is to use them a well fitting drop sheets for the repainting and then they will be replaced.

Lino - dead (or possibly alive) needs replacing.

Stove - I'm afraid to touch it- needs replacing.

Bathroom needs tiles and new shower screen.

I know the house sounds horrible but it has character, is in an improving street and I can see value at the price.

Now, I know that these repairs are going to be classed as improvements given that the property was purchased in poor condition. But perhaps there are some tax effective tricks and strategies I should consider?

Any feedback appreciated, cheers,

Shaun.
 
Hi Shaun,

what I suggest you do is perform most of the repairs yourself (if you have the time, keeping the cost down) & make it look even better than the one next door... then just get a Quantity Surveyor out to produce a depreciation schedule, which would be quite tax effective for the years to come... over the longer term, you would gain far more through the QS report versus just claiming for paint, etc... (even if you could claim them as repairs, as your time isn't considered here VERSUS the QS report looking at what the replacement value would be including labour)

Just my 2cents worth...

Cheers,

MannyB.
 
Shaun.

I don't know about tax effectiveness, but holes in walls are relatively easy to fix, doors not so, they never look quite the same.

The mind does boggle at how these holes get there, until you have lived with a nutter that puts them there... My ex used to put his head through walls and doors when he got mad... (see the 'EX' bit? hehe) suffice it to say I am good at fixing them. Aparrently hollow doors are best, because there is less chance of running into a stud!

(Just for a laugh) Once he tried to run through the laundry door, and got stuck half way through, did manage to pull the door off the hinges, and it was stuck on him. I wasn't allowed to laugh, coz of course, it was my fault... but I can laugh now!! HAHAHA!!!

sorry, I digress...

There is a product you can buy that looks like a large guage gauze, I think it is a selleys product. It is sticky on one side.
With large holes you need to cut them to a square (or rectangle, something measurable) and cut a slightly smaller piece out of a spare bit of plaster and using the gauze as a 'sticky tape' tape the patch into the hole. Let this settle for an hour or so (this is technically termed the 'beer break') then putty over it. For the amateur, I would recommend using selleys putty, the one that's already made up, and looks like thick marshmallow. I could never get quite the right consistency making my own up.

For smaller holes you can stick the gauze straight over the hole and putty over the gauze. I wouldn't do this to any holes wider than the actual gauze.

With the doors, I would recommend just replacing them, as I said, they never look quite the same...

Anyway, hope this helps.

If you need a hand, message me, if I have time, I'll come and help.


asy :D
 
I should add to my earlier post the following:

In terms of doors, I had a couple with holes in doors in an IP & filled them & sanded them back & basically repainted them & looked as good as new (Note: one needed some timber filling with some liquid nails b4 I could fill it, but turned out equally good)... that was because the holes were kinda small, otherwise replacing them with an new internal door would only set you back between $25 & $40, depending on whether you get plain doors or colonials (plus the cost of paint)...

Cheers,

MannyB.
 
Thanks and interesting repair.

Thanks for the advise manny and asy (asy, I hope that EX of yours is not renting in Caboolture, sounds like he's hell on doors).

I found an article on filling big holes with that expanding foam stuff and plastering over - might be worth a try.

I went to the property yesterday with the agent to take some photos - insurance if more damage occurs.

The tenant had taken the time to firmly tack photos over all of the holes in the walls, this could be the cost effective repair we've all been looking for!

Cheers,

S.
 
Originally posted by manny
Hi Shaun,

what I suggest you do is perform most of the repairs yourself (if you have the time, keeping the cost down) & make it look even better than the one next door... then just get a Quantity Surveyor out to produce a depreciation schedule, which would be quite tax effective for the years to come... over the longer term, you would gain far more through the QS report versus just claiming for paint, etc... (even if you could claim them as repairs, as your time isn't considered here VERSUS the QS report looking at what the replacement value would be including labour)

Just my 2cents worth...

Cheers,

MannyB.

Hi Shaun,

I’m not sure if this would work in your case because the IP is obviously damaged but I have done this before and it pays off big time.

Get a QS report as soon as you settle before any renovations even though everything in the IP is stuffed. As the surveyor cannot determine the age of your contents and you do not have receipts for the individual items, the values will be determined from your purchase price and the depreciation schedule will be created based on this figure. Once you have the report, feel free to gut you IP and renovate. As Manny said, do as much of it yourself to keep costs down.

Now comes the tricky bit. Whenever you replace something in your IP that still has depreciation left on it, you can scrap the remainder of the value and start again with the new value of the item replaced. This new value can either come from your receipt for the item or be determined by a quantity surveyor if you do not have a receipt. Remember this!!!

In my case I purchased an apartment, immediately got a QS report and immediately renovated. The renovation cost $11k. The replaced items were scrapped from the first QS report and this gave me a $20k tax refund in the first year. I also got a second QS report which is giving me continuing depreciation on the newly renovated apartment for the next 10 years. The $11k is also added to my cost base and if I ever sell this IP it will reduce my capital gain.

Some real figures from the QS reports –

- First QS report valued the original 8 year old, 100% nylon, pale blue, horribly stained carpet at $4700 based as a proportion of the purchase price (It made a good dropsheet)
- I replaced it with a 50/50 nylon/wool sisal-look carpet for $2100
- Second QS report values it at $3200 and I am getting on-going depreciation on this value

- First QS report valued the original 8 year old, filthy, white, Chef oven at $1600 based as a proportion of the purchase price
- I replaced it with a stainless steel Westinghouse oven for $600 (the tenants love it)
- Second QS report values it at $2200 (maybe they thought it was a Blanco) and I am getting on-going depreciation on this value


For your information I used BMT & Assoc in Sydney and I checked and rechecked this with them and my accountant and it’s how the system works. As I said before, I’m not sure how it would work in your case the property is obviously damaged but an oven is an oven and carpet is carpet and you have paid for it when you purchased the property regardless of what condition it is in. Check it out with QS guys and your accountant and you may be suprised. Remeber to ask “How can I do this?” not “Can I do this?” and keep asking until you get the answer you need.
 
Thanks Owen, I am definitely going to get this strategy looked at by an accountant/QS.

I was resigned to carrying the renovation costs, but if I can offset them in this manner that would be fantastic.


What about livestock? 2000 cockroaches @ 50c each, written off with the carpet?
 
Hi Owen,

what a good idea... I'll run it by my accountant & may apply it if I purchase an IP in need of some TLC...

Cheers,

MannyB.
 
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