Hear Cherie Barber talk about her latest project for the Living Room TV Show and why she told the owners not to spend $20,000 doing it up and how they achieved a better result with just $5,000 in expenditure. Cherie tells us about her 5 key improvements.

Get some more tips on buying a property below market value from Cate Bakos and Brad Beer from BMT Tax Depreciation explains more about how tax depreciation works following a question a few weeks ago from Sonya.

Buying your next home can be a daunting task, especially if it’s your first home. It’s exciting but full of complexities. While it’s likely to be the largest financial transaction you will ever make, Michael Yardney and his team have found that many home buyers are poorly prepared to ensure they make a good purchase decision and he says it’s not their fault. The system is stacked against them, with much of the power being on the side of the seller. To help guide you, he takes a look at the common mistakes made by home buyers – ones that you should avoid.

Rounding out our show for this week – we take a look at plans for a congestion charge in Melbourne and what will happen to property prices in and around the CBD. Jodie Walker, the coauthor of the article,  The Secret Agent Report May 2015 Congestion Tax, is our guest.

Our success story comes from Russell Gray who earlier this year, bought a block of land and did a "1 into 3 subdivision" when everyone else could only see a 1 in 2 subdivision.

 
Transcripts:
Brad Beer
Kevin:  A couple of weeks ago, Brad Beer from BMT Tax Depreciation answered a question from Sonia. Sonia was asking about the depreciation schedules and how reliable they are as an estimate when you’re calculating the viability of a purchase. We’ve had a couple of calls following that from people wanting to know what tax depreciation is. How does it really work?

Brad Beer, I know this is a difficult task for you, but over to you.

Brad:  Thanks, Kevin. Depreciation is a tax deduction for property investors. It’s related to the wear and tear of items within a property. The carpet one day is going to wear out, and you get to claim part of the cost or the value of that carpet as a deduction each year.

It also relates to other things in the building, including sometimes the building if it’s the right age. You get to claim a certain percentage of the construction costs each year as a depreciation deduction. Similar to your car: you buy it, it depreciates. If you use it for business, you get to claim some of that.

How it works as far as the rest of your tax is concerned as a property investor is you collect some rent from the property, then you have some expenses with the property – interest, rates, management fees, etc. If you are in a slightly negative situation there, and it costs you some money to actually hold that property, then you get to make a deduction against your other income for that loss you made against that property.

Depreciation is another tax deduction that will also go against your other income to increase the tax deduction, but you don’t actually pay it out. It’s a non-cash deduction. It means more deductions and, therefore, better cash flow on that property and more money in your pocket as property investors.

Many do get these other deductions but sometimes miss out on the depreciation because you don’t see it as much. You don’t pay it out, but it’s wear and tear. You get to make a deduction, and that means more cash flow for you as an investor.

Kevin:  That was a pretty good summary, and you did that in a couple of minutes. It’s a very complex subject. I guess it would be fair to say if you want to know a little bit more about it, you should always be working with your accountant, Brad?

Brad:  Absolutely. We’re one of the numbers in your tax return that’s very important. We work alongside the accountant to provide the depreciation part, because you relate to that construction cost