Key points

• Make sure your property has a depreciation report done on it.
• Revisit your loans and speak to your lender about the current interest rate on your investment loans.
• Review the performance of your property managers and if they’re not shaping up, it might be time to ship them out.

The new financial year means many things to many people, but for property investors it’s a good chance to get ready for the coming 12 months, and ensure you head toward the next tax period ready to go! Rather than carry over any bad habits, or continue your shoebox filing system, take the chance now while the year is young to get organised!

With our lives following an ever increasingly busy pathway, the temptation to set and forget with regards to property investing in your SMSF is a hard one to overcome. While everything seems to be going smoothly, there’s no point in upsetting the balance, right?

Wrong. Once a year all prudent investors and SMSF trustees should pull out the investment scrapbook, clean off the dust and ensure that everything is as it should be.

Here are just a few of my tips as to what you need to be doing, right now:

1. If you haven’t already done so, make sure that all of your properties have depreciation reports on them. Even older properties often still contain many depreciable items, and usually the tax-deductible cost of having one prepared will be considerably less than the additional deduction you receive.
2. Do a rental review – check when your leases are coming up for renewal, and schedule in your diary a phone call to your property managers for one month prior to be sure you are always at market rent. Remember, a rental increase of $10 a week is only worth about 70 cents to your manager, and so it is not as important to them as it is to you. Even if rents are largely the same I find that a tenant won’t move out for a $5-10 a week increase.
3. Consider any repairs and maintenance that need to be done so that a maintenance plan can be established to cover the entire year. This way your cash flow can be better managed by attending to the most urgent repairs immediately, and spreading the rest out over the year. Have your property manager do an inspection and provide you with a list of suggested repairs – some managers are better than others on this, so be sure you get onto it and have one done.
4. Review the performance of your property managers. How long have vacancy periods lasted? How good was the communication between the manager and you? Have they been pro-active in suggesting rental increases? Do they attend to requests for maintenance in a timely fashion? If not, maybe it is time to terminate and try a new manager.
5. Check local values and perhaps book to have a revaluation done on all of your properties. If you have more than one property, you only need a small increase in the value of each to create enough to give you a deposit for another property.
6. Revisit your loans and speak to your lender about the current interest rate on your investment loans. Few people negotiate this area well and I have, in the past, negotiated discounts of well over 1% off the current variable for most of my clients. On a larger portfolio, a good interest rate discount can really boost your returns.
7. Ensure that you have started the current financial year more organised than you were last year! The more properties you acquire, the harder it gets to track the financial details of each of them, and the more costly it is to have your accountant sort through the mess at tax time. Start the year with an organised approach to your property accounting, and use an online tool like Destinylive® to track everything, so you can throw away that shoebox!
8. Make a decision early in the year about any properties that you might be thinking about selling, and ascertain what the resulting capital gains tax might be. This is because if you are thinking of selling a property with a potential gain and one with a potential loss, you want to sell the one with the loss first. Capital losses can be carried forward over future tax years to offset against future capital gains, but capital gains cannot be carried over and must have a loss elsewhere in the same year to be reduced. Those wishing to sell should have a carefully thought out and timed plan to do so.

Don’t forget to review the entire portfolio. Some properties may have already had their best period of performance and it could be time to sell. Others may not have performed as you had hoped and if there is no sign of a potential change, it could be time to cut your losses. All properties within your SMSF should be reviewed every year to ensure that they are delivering a suitable return. Properties which do not perform and which exist in areas where suitable growth drivers cannot be identified should be cut loose sooner rather than later, and a better performer chosen to replace it.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.