Property investors can grab big bucks from keeping tenants happy

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REPLACING ovens, dishwashers, airconditioners and other items in an investment property can be a winner for both tenants and landlords.

A happy renter is less likely to leave, while many property investors do not realise the tax benefits they can grab by replacing old with new.

BMT Tax Depreciation CEO Bradley Beer says many investors may be surprised to learn just how much can be claimed in tax deductions for the reducing value of common household items.

Generally you can scrap the old item, and on top of the deduction for the new item, the residual value of the old item should be an instant 100 per cent deduction in the year that you throw it away, he says.

All the values are included a tax depreciation schedule, prepared by a quantity surveyor and typically costing between $600 and $800.

The tax write-off rules apply not just to individual items, but also to rooms such as a kitchen. Beer says an investor who replaces a 20-year-old kitchen, for example, should know that a kitchens effective life is 40 years so you may have half the value of the kitchen left to claim.

Make sure you have got a depreciation schedule before you rip it apart and throw away any value. People often say I will call you after renovating but we say no, call us first.

Having a written record also gives an investor proof if the Tax Office decides to audit them later on.

Beer says between 70 and 80 per cent of Australias two million-plus property investors do not maximise their depreciation deductions.

Real estate author, investor and university lecturer Peter Koulizos says kitchen and bathroom upgrades can deliver the biggest boost in rent.

Generally the kitchen and bathroom are most important when it comes to determining rent, after the number and size of bedrooms, he says.

When you get rid of old appliances, its called scrapping its bringing all the depreciation forward, plus you can also start depreciating the new item straight away.

You get a happier tenant, more rent, money upfront with scrapping, and a tax deduction longer term with the new item.

However, investors should do a cost-benefit analysis and not pay thousands of dollars on upgrades if they get little return.

Theres no point spending a stack of money if you only get a little back. Think about how long you will keep the property, Koulizos says.