Property Newsletter – September 2014

The little tax secret to massively boost your cash flow

Wouldn’t it be great if you didn’t have to wait for your tax refund? With this little-known trick, it’s possible.

Investors who own negatively-geared properties will understand that it can sometimes be an agonising wait for your tax refund. You’ve scrimped and saved all year to invest for your future, and finally the taxman rewards you with a big fat cheque.

While some people like the idea of getting an annual tax refund, it doesn’t really make financial sense. By paying more tax than necessary, the tax office is essentially ‘holding’ your money. Wouldn’t you rather have the money in your pocket from day-one to do as you please? You could pay off your mortgage sooner, or maybe buy another investment property.

Well, it’s possible to get your refund as part of your regular salary payment using a feature of our Pay-as-you-go (PAYG) withholding system.It involves submitting what is called a PAYG variation. This is basically an application telling the Australian Tax Office how much of a loss you expect to make on your investments, so that you only have to pay tax on the adjusted amount.

Once approved, your employer will reduce the amount of tax withheld from your pay to reflect your anticipated deductions (such as interest payments and depreciation), which could easily add a few hundred dollars to your pay packet.

Strangely, many investors don’t know about this strategy, but it can really make a difference to your cash flow.

To find out more about a PAYG variation, it’s best to talk to your accountant.

Expat’s guide to choosing the right Australian investment property

How can you find a high-performing investment property from a distance? Here are a few tips to get you started. Property is a popular investment vehicle for many Australian expats because it appears safe and stable. It’s widely believed that all properties will grow in value, and that the “worst case scenario” is simply a lower rate of capital growth.

Sadly, this is not the case. As property investment specialists, Momentum Wealth is regularly contacted by owners of properties that have significantly dropped in value, severely undermining their investment goals. Some properties have stayed stagnant and are likely to continue in this vein for a number of years to come.

One factor in buying a high-performing investment property is choosing the right location. But what if things have changed while you’ve been working away? Some neighbourhoods improve over time, while others deteriorate or plateau once they have peaked. How can you tell from a distance? Professional property analysts consider a wide range of factors in their research. Here are a few tips to get you started.

  • Look for rising demand. Is there something about a suburb that will make it more popular in five years’ time than it is today?
  • Look for new infrastructure – new facilities which make a location more convenient or desirable. But don’t sacrifice long-term desirability! Many investors get hooked by the allure of a new school, train station or shopping centre, but if the suburb is still an hour from the main city centre, and lacks job opportunities then these amenities may not be enough to drive significant price growth in the long term.
  • Look for signs of gentrification. If you see a large proportion of residents renovating and extending their properties, and new café strips or shops opening in an area, it often means that the demographics of a suburb are changing for the better. Rising household incomes support rising house prices, which is great news for investors who get in early.

So where do you find this information? As expected, there is plenty of information online, some good and some not very good. For many expat investors, the logical choice is to hire a local property specialist to do the research for them.

Choosing “the one”

Even within a high-performing location, the wrong property choice could cost you significantly in lost capital growth, and even prevent you from buying more properties in the future. There are over 46 factors in choosing an individual property such as: the market appeal of the house itself; impact of the neighbouring property; add-value opportunities; rental appeal; future property maintenance and repairs required; features and specifications; structural and building issues; price and scope to negotiate, and more. Extensive research is critical to ensure that you aren’t disappointed with your choice. If you don’t have time to conduct this research yourself, a buyer’s agent can undertake it on your behalf.

When it comes to inspecting the property, it’s critical that you have someone viewing the property on your behalf. Some opportunities (e.g. a great floor plan, or room for a granny flat) or defects (moisture damage, issues with neighbouring properties) are impossible to see from photos alone.

5 things to consider before renovating your rental property

There are many reasons why you might want to undertake a renovation. But before you get stuck in, here are some key points to consider.

It’s often towards the end of a tenancy that rental property owners consider undertaking some minor renovations. It is, of course, easier to do work on an empty property than a tenanted one.

There are many reasons why you might want to renovate.  It may be to improve your rental yield, increase the value of your property, attract better quality tenants, or a combination of factors. The renovation needn’t take a lot of time, as there are many little things you can do to rejuvenate a property in a short amount of time. But before you get stuck in, here are some key points to consider.

#1 – Don’t skip the planning stage

Even if you are only considering a small renovation, don’t think you can bypass the planning stage. You should still have a clear budget in place and carefully plan the various activities, so as to avoid a cost blowout and an extended vacancy period. Remember that tradespeople have lead-times and most won’t be able to start a job immediately.

Try to inspect your property before the tenants vacate to give you the most time for planning, and a good tip is to ask the outgoing tenants for feedback on what could be done.

#2 – Consider your return on investment

Don’t get carried away in the renovation whirlwind. Be realistic about what things cost and only replace items when it is absolutely necessary.  Always consider your return on investment. Will the increase in rent justify the cost? How long will it take to recoup your investment?

It helps to research the market and talk to your property manager about what is expected in the area and the features that are most sought-after.

 #3 – Think before you scrap

Many investors are unaware of the fact that certain plant and equipment, which may seem worthless and ready for replacing (like carpets and hot water systems), can actually be claimed as a tax deduction.

Before you discard or demolish anything, make sure you get a quantity surveyor to put a value on the items you are scrapping. The residual value of these items (i.e. the amount that is yet to be written off) can generally be claimed as a 100% tax deduction in the financial year that they are disposed.

#4 – Concentrate on the right areas 

Focus on the upgrades that will be most welcomed by prospective tenants. A lick of paint and new carpets are always popular choices because they make a strong impact. New benchtops and window coverings can also help to transform the look of a property.

But it’s not always about looks.  Some of the best upgrades may involve enhancing the security or comfort of your property.

And don’t ignore the outside, as street appeal is very important. You don’t want prospective tenants dismissing your property after a quick drive-past. Little things like painting the fence and tidying the garden can do wonders.

 #5 – Suitability

Whichever areas you decide to focus on, remember to always choose tenant-friendly items. Buy things that are durable and hard-wearing as this will save you time and effort over the long term.

 Does a sloping block mean money down the drain for a potential development site? 

When assessing a potential development site, one of the major considerations should always be the slope of the land. The slope is important because it can significantly impact on the feasibility of a project. Some developers will instantly dismiss a sloping block, but is this strong aversion warranted? Let’s look at some of the potential impacts of developing on a sloping block.


Drainage is perhaps the biggest area of concern for developers considering a sloping block. Generally speaking, a block that slopes towards the road, where the sewer line is located, shouldn’t have a problem with drainage. But one that slopes away from the road can cause all sorts of expensive headaches, depending where the sewer line is located.   It’s worth noting that, when it comes to drainage, a flat block isn’t always straight-forward either, as it may need to be built up in certain parts.


When building on a sloping block, you generally need to do some retaining of the land, which can be rather expensive. There are also likely additional excavation and filling costs to consider.

Building height

Depending on the state residential planning codes and local council policies in regards to the measurement of building height, this can impact the development potential of a block.

An opportunity?

Can a sloping block offer any unique advantages for the astute developer? When developed correctly, some sloping blocks can provide outstanding views, prized by buyers and tenants. By forcing the developer to work with the natural restrictions of the land, a sloping block may also result in a better design and more interesting development. This could potentially improve profitability.


Does a sloping block mean money down the drain? It certainly presents some unique challenges, but it is often possible to work around any potential issues.  The fact that it is sloping may deter other developers and leave a potential great opportunity on the table.

The important thing is to always approach a potential development with your eyes fully open, factoring in any additional costs that may result from having a sloping block. But if you do your sums and it all stacks up, there’s no reason why a development couldn’t be a success.

 Is the stigma lifting on this underutilised riverside suburb? Ashfield

Ashfield came onto the radar of many investors when talk first emerged about the Ashfield Precinct Plan, which was formally released at the beginning of 2010. Ashfield is located on the Swan River, 9km from the Perth CBD and part of the Town of Bassendean. It’s a very small but well-located suburb serviced by major strategic transport routes, including Guilford Road and Tonkin Highway.

It has its own railway station on the Midland line and the Perth airport is located just on the other side of the river. The suburb was mainly developed in the mid 1900s, but many older homes have now been renovated or replaced by newer ones.

With its high proportion (20%) of state housing and reputation for anti-social behaviour, Ashfield has always carried with it a certain stigma. Though, it’s fair to say that this has been improved over recent years. In real estate terms, the suburb’s median house price is $515,000, below that of Perth, but its growth has generally outperformed the Perth average over the past 10 years.

The Ashfield Precinct Plan, published by the state government, is intended to guide future development within the precinct, which roughly encompasses an 800m walkable catchment of the Ashfield Railway Station. This area actually includes parts of neighbouring Bassendean and Bayswater.

The aim is turn the area into major employment activity centre by utilising large pockets of relatively underutilised but strategically located land. Recommendations include increasing the utilisation of public transport by improving accessibility to the train station, and facilitating higher residential densities. With plenty of demand for affordable housing in Perth, Ashfield could be a promising target for developers looking for residential subdivision opportunities.

Momentum Wealth’s own research has uncovered some potential risk factors and we buy selectively in the suburb. But all in all, there is enough to warrant a look at this changing suburb.



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