Rise High Investor Weekly Video #52 – What is depreciation and how does it work



What is Property Depreciation?

Depreciation is a key concept for property investors, offering potential tax benefits while acknowledging the natural wear and tear on your property. Here’s an overview of what depreciation is, how it works, and important considerations to keep in mind.

Key Considerations for Depreciation

While depreciation can be advantageous, there are a few important things to keep in mind:

  • Tax Rules May Change: Depreciation rules are not set in stone and can be amended over time. For this reason, it’s important not to buy an investment property solely for the depreciation benefits.
  • Fundamental Value First: Always ensure your investment property has strong fundamentals, such as location, growth potential, and rental yield. Depreciation and tax benefits should only ever be viewed as a bonus.

How to Maximize Depreciation Benefits

To make the most of depreciation, consider the following steps:

  • Obtain a Depreciation Report: After purchasing an investment property, consult a qualified quantity surveyor to determine if a depreciation schedule is worthwhile. This report outlines the allowable deductions for your property.
  • Consult Your Accountant: Discuss with your accountant how to incorporate depreciation into your tax strategy to maximize your deductions and improve your investment returns.

 

Not all properties will benefit equally from a depreciation schedule, so it’s essential to evaluate whether the cost of obtaining one is justified by the potential tax benefits.

Why Depreciation Matters

When utilized effectively, depreciation can:

  • Enhance Cash Flow: Reduce your taxable income and increase your property’s overall return.

Offset Expenses: Help cover the natural wear and tear of your property’s assets over time.

Ready to Learn More?

Depreciation can be a powerful tool in your property investment strategy, but it’s crucial to approach it with the right mindset. Focus on the fundamentals of your property, and let depreciation serve as an added bonus.

If you have questions about depreciation or need advice tailored to your situation, reach out to a Rise High Investor Property Advisor. We’re here to help you succeed in your investment journey!