Five Ways to Profit From Eco-Upgrading Your Investment Property
As the rain beats down on this Queen’s memorial public holiday, it seems a sign of things to come as we head into summer, bracing for yet another season impacted by La Nina, our third in as many years.
Spare a thought for all those that flooded in 2020 and 2021.
Some of them are still living in houses in a state of disrepair, waiting for builders and insurers to work through their backlog of work.
And it’s not just Australians that are suffering.
As we watch reports of floods in Pakistan and Italy, or typhoons in Japan, or mudslides in California, it’s hard to ignore the fact that catastrophic weather events are occurring with increasing regularity.
Combine that with the current economic uncertainty and rising interest rates, and it’s hard not to feel a bit despondent about it all.
But rather than sit back and wonder how it all came to this, there are ways to take a more proactive approach and consider ways in which we can maximise our investments and protect our financial future, and at the same time, reduce our footprint on the planet.
Mike Mortlock, managing director at MCG Quantity Surveyors, believes smart landlords who ‘go green’ on their investments are reaping financial rewards.
“The old trope is that you can either be a raging capitalist investor or an eco-warrior, but not both,” Mr Mortlock said.
“I beg to differ because there are ways improve your investment’s green credentials while boosting the rent and minimising your tax burden through cost write-offs and depreciation benefits.”
It was clear from the federal election results earlier this year that many Australians are increasingly concerned with climate change and voiced their support of greater commitment to net zero targets.
Eco-friendly and energy-rated design is taking on more importance and are now inherent in most building approvals. Not only do they reduce the impact on the planet, they ultimately result in lower running costs for tenants and depreciation benefits and greater tenant appeal for landlords.
Mr Mortlock outlined five moves property investors could make to help both the planet and their bank balance.
- Heating and cooling
Starting with arguably the biggest contributor to both residential carbon emissions and ongoing costs, air-conditioning and heating systems leave a heavy footprint on the planet through the high use of energy.
Not only that, we’ve just lived through a cold winter with extended below average temperatures, placing unprecedented demand on electricity suppliers and forcing regulators to order generators back into the market to avoid power shortages.
As the weather changes, so too does our reliance on heating and cooling.
But there are ways to modify our homes and investment properties to make them more efficient.
Mr Mortlock proposes insulation to roof and wall cavities as an excellent start. For investment properties, the works can be claimed as a capital works deduction and typically cost around $2000 to have your ceiling blanketed.
It might seem obvious, but the installation of ceiling fans is a relatively cheap option at a couple of hundred dollars a pop. Much more common in QLD, NT and north WA, they are a simple addition to get the air moving and reduce the impact on some of those sweltering summer days. If it costs less than $301, the outlay is fully depreciable on your next tax return.
Other options include window film and other design options to keep out the heat in summer. Tinting will generally cost between $50and $100 per square metre and is treated as a capital works deduction.
- Power generation
Solar systems are fast becoming a common inclusion in new builds and are easy to retrofit. Battery storage makes it easier to justify the cost, and while installation doesn’t come cheap at between $5,000 and $15,000 for a decent system, the merits can make it worth it.
Not only are they appealing to tenants due to electricity savings, you can also benefit from a tax depreciation rate of 10% per annum.
Less common, but equally advantageous if your investment is an acreage, are wind turbines which are a great source of energy. Costing around $2000 , turbines can also be depreciated at a rate of 10% per year under the diminishing value method.
- Water collection
The long-range weather forecast of ongoing rain this summer makes the inclusion of water tanks in this list a no-brainer. A staple in Aussie homes for decades, the capturing and reuse of tank water for toilets and washing machines is a simple and effective means of reducing excess water charges.
That keeps tenants happy, and can mean a rent boost for the right property.
And it’s good for the environment.
As at July 2019, rainwater tanks were listed by the ATO as a plant and equipment item. So not only can they be installed and plumbed into a home for well under $10,000, they can be claimed back on tax at a whopping rate of 40%, rather than the standard 2.5%.
- Future proofing for cars
It’s rare to drive into a public carpark these days and not see an electric vehicle charging station.
And with the Federal Government’s recent announcement to honour it’s election promise by introducing incentives to make electric vehicles more affordable, it’s likely we’ll see the demand increasing.
Which means that sooner or later you’re going to need to fit out your garage with a car charger. Doing it sooner will no doubt appeal especially to inner city tenants who have adapted their vehicle usage and don’t have to contend with the challenges presented by regional travel.
According to Mr Mortlock, domestic car chargers cost around $750 to $1500 and will net you a 20% depreciation rate each year.
- Gardens a-growin’
There’s money to be saved by designing a garden that works with the natural environment. That means a low maintenance garden filled with mulch and native plants that don’t consume much water.
A landscaped garden might set you back up to $20,000 but you can claim some of it back through your tax return. Plants and turf won’t attract deductions, but hard landscaping such as retaining walls, paving, concreting and fencing will.
Not only that, it will make it much easier for tenants to maintain, and it will do it’s bit in converting back carbon emissions.
Where does MCG come in?
We love helping our clients make the most of their investments, and if that means contributing to a sustainable planet, that’s a win-win for us.
We pride ourselves on ensuring that our clients have the most up to date, thorough information to allow them to make smart investing decisions.
Our experienced Quantity Surveyors can provide comprehensive tax depreciation reports that maximise your investment dollar.
Contact us now for an obligation free quote on 1300 795 170 or go to our website mcgqs.com.au for more information.