The Quantity Surveyor
Access that equity!
Having achieved my first goal of obtaining a suitable valuation and creating additional equity in my property, it was time to proceed to the next step—turning that equity into money and increasing my bank balance.
Having more equity in your property is like seeing the value of your shares increase. It gives you a feeling of wellbeing but means little until you’ve sold your investment and taken the profit.
To access the new equity in my apartment, I decided to re-finance my existing home loan. But before approaching the bank, I wanted to put together a comprehensive report detailing my financial position.
Some readers may have personally refinanced a loan or know someone who has. Although the effort I went to wasn’t necessarily required to refinance my property, I compiled a financial report because I would use this information again when I applied for new investment home loans.
What’s a quantity surveyor?
My next step was to obtain a quantity surveyor’s report. I use a quantity surveyor to find every legally depreciable item in my property, and then provide a schedule of those items showing straight-line depreciation and reducing-balance depreciation, and the economic lifespan of each item.
Examples of depreciation schedules can be obtained from most new large residential property developments. Depreciation schedules are usually provided to prospective investors to show the tax deductions claimable at the end of the financial year. Depreciation schedules are particularly prevalent when purchasers have the option to buy a furniture package with the property.
For readers who have never seen a quantity surveyor’s report, I recommend that you visit the display suite of a large residential development and request a copy of the depreciation schedule. Here are some of the items included in a quantity surveyor’s report.
- building
- floor coverings
- light fittings
- electrical appliances
- window furnishings
- air-conditioning units
- ducted vacuum units
- automated garage door control unit
- heating systems
- alarm systems
- hot water system
Remember that tax legislation differs between countries and jurisdictions. It frequently changes, and those items mentioned above may not always remain depreciable under the tax laws that apply to you and your properties.
Why you want a quantity surveyor’s report
I obtain a quantity surveyor’s report for a number of reasons.
The first is that naturally I want to claim the maximum depreciation allowable in my tax return. To make sure that I don’t overlook anything, and that the information I provide to my accountant is true and correct, I use a professional quantity surveyor.
The second reason is simply convenience. As I mentioned above, tax legislation frequently changes, and I don’t have the knowledge or inclination to keep abreast of it. Probably, neither do you. I freely admit it is not my area of expertise. For a nominal fee, a quantity surveyor can save you far more in tax than what they charge, and the cost incurred is tax deductible.
The third reason for obtaining a depreciation schedule now, rather than waiting until the end of the financial year, was that I wanted to include this information in a comprehensive financial report for the bank.
When I approach the banks for loans I want to be treated like a professional investor, and when making any decisions regarding an investment you must know, in advance, every financial consideration relating to your investment. Banks who give you loans are investing in your knowledge of the investment, as much as, in the investment itself. They want every pertinent detail relating to the security of their money and your ability to service the loan.
Any investment property that I buy must be self-sufficient. The income generated by rent and taking into account any tax benefits such as depreciation, must cover all expenses incurred by the property. These expenses include loan repayments, rates, and body corporate fees.
By giving the information from the depreciation schedule in my financial report, I wanted to show that an increased loan secured against my existing property would be fully funded by income from that existing property. Also, a depreciation schedule from a professional quantity surveyor lent credibility to my report, because the quantity surveyor is independent and has no vested interest in my property.
Summary
- After getting a good valuation on your property, you’ll want to access your new equity
- A quantity surveyor’s report is a good addition to the financial reports you’ll give to the bank when refinancing or applying for a new loan
- Quantity surveyors give you an independent opinion on all the items in your property that are depreciable
- Having a quantity surveyor’s depreciation schedule can save you money on taxes, and also saves you the trouble of keeping up with tax regulations yourself
