Although “repairs and maintenance” is often used as an umbrella term for anything that needs doing to a property, there are actually four quite different categories involved. For any investor who is serious about maximising their return, all four types of expenses should be regularly considered.
The first type of expense falls into the obvious repair category. These occur when something goes wrong as a reactive response. An example would be a blocked pipe, a broken-down oven or a roof that suddenly starts leaking. Repairs don’t improve the value of a property; they’re just the bare minimum required to maintain the property in an adequate condition.
The second type is called seasonal maintenance. These are items which ideally should be regularly attended to, to ensure the number of repairs in the previous category is kept to a minimum. Gutter clearing, garden pruning, painting to prevent cracking and deterioration, checking the roof tiles, and regular pest control all fall into this category.
The next type is called investment maintenance. This is the planned replacement of any item in the property that depreciates in value, including carpets, blinds, oven, hot water system, insect screens and the like. Planned maintenance negates even more repairs that would otherwise fall into the first category and enables a good level of control over the standard of the property and the cost of maintenance.
Lastly are capital works. This is any new element that’s introduced into the property. An example might be adding a dishwasher, a new sprinkler system to enable tenants to look after the garden, or installing an air-conditioning system. This type of expense is likely to actually increase the value of the property as well as the rental return.
If a landlord only attends to items in the first category, over time the property will be worth less and the rental return will effectively fall. With careful consideration of all four categories, the property can achieve more rent, a better quality of tenant, and the value of the property is likely to increase. And with the tax breaks available on property related expenses, there’s every good reason to do so.
For a quantity surveyor we highly recommend BMT Tax Depreciation. Please phone me on 0402 220 988 or BMT on 1300 323 213 should you require any further information.