MCG Quantity Surveyors managing director Mike Mortlock said it was time for investors to do away with the trope that you can be a capitalist investor or an eco-warrior. — but not both.
“I disagree because there are ways to improve the green credentials of your investment while increasing rent and minimizing your tax burden through depreciation and amortization,” he said.
The expert noted that property owners and investors should take the lead in “going green” after Australian voters voiced support for action on climate change in this year’s federal election.
“We have reached a point where the public appreciates green measures designed to help address climate action. “Think global, act local” as the saying goes,” he said.
Mr. Mortlock said this initiative now extends to housing, pointing out that energy-efficient designs are now a fundamental and necessary part of building approvals.
In addition to being environmentally friendly, he explained how having a “green” investment property can be financially beneficial for investors. “Energy saving measures in investment properties result in increased tenant appeal – hence higher rents – lower operating costs, depreciation benefits and a cleaner planet.”
With that, Mortlock listed five steps real estate investors can take that could both help the planet and an investor’s bank account:
1. Heating and cooling
Mr Mortlock said heating and cooling systems (eg air conditioning systems and high-energy radiators) have been shown to be major emitters of carbon, which have adverse effects on the planet.
But he offered that there are ways to reduce your property’s carbon footprint.
“Insulating the roof and wall cavities is a great start. For about $2,000 you can cover your cap and it can be claimed as a capital works deduction,” he said.
If the high price of insulation is intimidating, Mortlock recommended less expensive solutions. “Installing a ceiling fan is also helpful, and if it costs less than $301, the expense is fully depreciated on your next tax return.
“Then there are window films that can keep the heat out in the summer. A window tint will cost you between $50 and $100 per square meter in most cases and is a capital works deduction,” he said.
2. Power Generation
Going off-grid becomes very attractive to most investors, as grid-connected homes are required to pay a flat-rate supply charge regardless of usage.
Mr Mortlock advised investors wishing to disconnect from the grid that there are ways to create independent power sources on a small suburban block.
For starters, he recommended looking into solar power systems and battery storage, which are easy retrofits.
“Although they are not cheap – a decent system installed will cost between $5,000 and $15,000 – they can be worth it. In addition to being attractive to tenants, installing solar panels allows you to amortize its cost by 10% per year using the diminishing value (DV) method,” he explained.
If the property has additional acreage, Mr Mortlock said investors could assess the feasibility of installing a wind turbine.
“A wind turbine that costs around $2,000 can generate tremendous power. Even better, depreciation benefits based on an effective life of 20 years give you an additional 10% per year via the DV method,” he said.
3. Water collection
Mr Mortlock also urged investors looking to become eco-warriors to use water tanks in properties, which has been common in Australian homes for decades.
He said using this water for toilets and washing machines “makes sense” from an investor perspective, as they can minimize the possibility of tenants having to pay excess water charges. .
“That can mean a rent increase for the right property,” he said.
“Water tanks can be installed and plumbed into a home for well under $10,000 and as of July 2019 rainwater tanks were listed by the ATO as an item of Plant and Equipment. This means that instead of a 2.5% deduction, you get a whopping 40% claim rate.
4. The future of cars
There is no doubt that the future will be filled with electric cars, Mr Morton said, and advised investors to consider fitting garages with a car charger.
He noted that this would strongly appeal to owners of energy-efficient cars. “This would especially appeal to downtown renters who want to keep their Teslas charged.
“Domestic car chargers cost between $750 and $1,500 and I expect we will see them in properties as regularly as water tanks. In the meantime, vehicle chargers will earn you a 20% depreciation rate every year,” Morton said.
5. Sensible and environmentally friendly landscaping
Finally, Mortlock said landscaping with mulch and native plants could be a cost-effective and environmentally friendly choice.
“Native plants are low maintenance plants that don’t use a lot of water. They also help convert carbon emissions back,” he said.
While a “a thoughtfully designed landscape could cost an investor around $10,000 to $20,000, Mortlock proposed that some of this could be claimed through a tax return.
“Things such as plants and turf won’t attract any deductions, but hard landscaping such as retaining walls, paving, concreting and fencing will,” he said.
An investment is an asset or item purchased with the expectation that it will generate income or increase in value in the future.
Property refers to something tangible or intangible over which an individual or business has legal rights or ownership, such as houses, cars, stocks, or bond certificates.