Tenanting a IP whilst renovating it....any experience?

Hi there

I have just purchased an IP in Brisbane which is about to settle. It is currently owner occupied. It needs some cosmetic renovations - paint, carpet, aircon, blinds etc (or at least I would like to make some!).

Anyway I have been advised that I should renovate after I have tenants in the property as the tax benefits are much better. It has been suggested I rent out at a discount for say 6 mths whilst I renovate around them. I would then up the rent to market value after this (fully disclosing the plan to the tenant of course). I am estimating I could get about $30 - 40wk better rent for renovating it.

I am interested to ascertain whether anyone has any experience with this scenario?
 
A lot of the expenses will have to be depreciated, so it's not like you are "repairing" something and can claim it that year.

I've always found that we are better to get the place painted and "rent ready" and then advertise it. I'm always amazed a how that last week of renovating turns a "sows ear" into a "silk purse" and even property managers who have looked at the "before" house and given us a rental appraisal have been lower than we've got for the "after" house.

I've definitely seen the look of horror in prospective tenant's eyes when they see a house mid-reno and even when they see a house when the outgoing tenants stuff is all over the place. It just isn't presented well and people have no imagination.

So, we don't bother now. We wait until it is looking its best and then start showing it. (That is mostly down to having enough buffer to allow a week empty if necessary whereas in years past, we just had to get the rent flowing ASAP, hence the early inspections.)
 
Anyway I have been advised that I should renovate after I have tenants in the property as the tax benefits are much better.


This is simply untrue.

You are improving the property, so anything you do will be depreciated. You cannot claim repairs unless the damage has been done after you own the property.

Given tenant rights, it would be very difficult to renovate while the property is tenanted as tenants are entitled to "quiet enjoyment" of the property.
Marg
 
Thanks guys - you have supported my kind of thinking. Everything I will doing is pretty much an improvement so I thought I would be able to depreciate. Much easier to get everything done whilst the place is empty.......and less stressful.

Inconveniencing tenants (and property managers!) is not really my game either.
 
I may be incorrect, but you have to have the property for about 6 months before it is a repair. Otherwise it's a capital improvement. Anyone else heard this?

I've done it once. Rented the main house whilst undertaking extensive renovations. Rent went up then tenant didn't want to budge or pay.
 
Virtually all the renos will be capital in nature as they fall under initial repairs by the ATO as they cannot be attributed to a period when the asset was generating an income (as you have only just bought it).
 
I may be incorrect, but you have to have the property for about 6 months before it is a repair. Otherwise it's a capital improvement. Anyone else heard this?
.

Again, untrue.

It all goes back to the condition of the property WHEN YOU ACQUIRE IT. Anything that restores damage to that condition is a repair (with a few exceptions for tax experts) and anything that makes it better is an improvement and depreciation applies.
Marg
 
Again, untrue.

It all goes back to the condition of the property WHEN YOU ACQUIRE IT. Anything that restores damage to that condition is a repair (with a few exceptions for tax experts) and anything that makes it better is an improvement and depreciation applies.
Marg

I know my friend was advised differently. I personally had it added as a capital depreciation.

I'll ask my mate how he had it set up.
 
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