Investment Property Portfolio Health Check

Louise de Savery, Senior Valuer — Newcastle

With the end of the financial year almost upon us, it’s time to carefully look at investment property assets and what needs to be considered at this time of year to maintain a healthy investment.

If you own one investment property or a portfolio of property assets, you might benefit from our guide to pre-EOFY considerations.

Define your investment property objective

Yield vs capital growth. Is your goal the same today as it was when the property was first purchased or has your focus and expectations changed?

Assess the performance of your property investments

Have you recently reviewed the performance of your property investments? Is the capital growth and/or rental income delivering you a good level of financial return in keeping with market performance?  Not all properties perform at the same level. So, if your asset is under-performing it might be time to undertake a property portfolio review to ensure it still fits your objective (yield vs capital growth).  This applies to both the residential and commercial sectors.

Are you maximising your tax deductions and claiming all relevant items?

Do you have an up-to-date tax depreciation schedule to capitalise on allowable deductions?  This will increase the cash flow generated by your investment property and ensure that full benefits are paid to you.

Do you have an up-to-date valuation on any SMSF assets?

All SMSF assets require annual reporting containing an up-to-date market value on all property assets. Now more than ever, the ATO maintains a sharp focus on accurate SMSF auditing with heavy penalties in place for non-compliance.

Is your investment property adequately insured?

With most market sectors currently experiencing changes in property values, it’s more important than ever that your property is correctly insured.  Two critical factors influencing insurance replacement costs would be the profound increase in construction costs and the susceptibility of natural disasters (i.e. flooding, fires, cyclones, etc).  Ask, is your current level of insurance replacement cost (RCE) assessment adequate, and does it provide sufficient cover in the current environment?

Owners of strata investment property need to re-assess the various fund allocations.

Have a clear understanding of the projected use and level of funds in the ten-year Sinking Forecast Fund (SFF), which caters for all capital works and building maintenance requirements.  Ask, do the estimated costs and retained funds reflect current and future levels of increased construction and labour costs adequately? 

Are you intending to purchase an investment property to minimise your tax payable?

You may wish to either add to your existing portfolio, switch out of a non-performing asset and into a better option or start your journey in owning your first investment property.  Importantly, you need to make an astute buying decision that will suit your end goal.

The team at Acumentis can assist in providing pre-purchase advice and/or an independent market valuation on a property of your choice, which will give you the confidence to purchase the right property at the right price.

Nathan King
National Director – Advisory, State Government & Projects, State Director – WA
CPV | AAPI | FRICS
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