28 Jan Properties and pools – Brad Beer
I have spoken on this show in the past about pools and whether or not they add value to a property. Today we talk to Brad Beer about the pros and cons of investing in a property with a swimming pool if you’re going to be leasing it out.
Kevin: Well, quite often on this show we talk about pools and whether or not they add value to a property. That’s a separate conversation all together, because I want to talk about the pros and cons of investing in a property with a swimming pool if you’re going to be leasing it out, having a tenant in it.
Kevin: Well, given the warmer weather I guess that we’re experiencing right now, one area of a property that’s worth focusing on is the backyard, the backyard pool. I’m going to talk to Brad Beer, the Chief Executive Officer of BMT Tax Depreciation, about the advantages and disadvantage of investing in a property that has a pool.
Kevin: G’day Brad, how ya doing?
Brad: Good, Kevin.
Brad: I like to swim in a pool, in the warm weather.
Kevin: Yeah, exactly. Don’t we all?
Kevin: Let’s have a look at some of the factors that landlords need to consider about depreciation. What are some of the factors that they need to be aware of, if they’re planning to rent a property that’s got a pool, or even put a pool into a property that they’re going to rent?
Brad: I guess before we get to the depreciation part of that, there’s a lot of things around the pool that … firstly a lot of safety issues I guess.
Kevin: Safety, yes.
Brad: Fencing, gates, filters up to scratch, and I think in New South Wales, there’s a bunch of compliance certificates and there’s the risk of people … Unfortunately, pools have got risk attached with drownings, et cetera. And, just making sure that everything’s done properly, is probably the first thing.
Brad: There’s a bit more maintenance required. You’ve got to make sure it’s clean. You’ve got to make sure we got tenants that do want a pool. Electricity costs. They say between $800 and $1,200 a year, so it’s an average of $20-odd bucks a week additional cost just in electricity. So, there’s definitely a few cons sometimes that make it a bit more difficult with a pool, but obviously, people like pools as well.
Kevin: I don’t. In fact, we put two pools in, over our years of owning properties, and I think both of those pools have now been filled in. So, I’m not a great believer in a pool. But having said that, many people are.
Kevin: What are some of the depreciable items found in pool areas?
Brad: Yeah look, we talked there about the fact that there’s a cost associated with the pool, but where there’s cost, there’s depreciation, right Kevin?
Brad: When you spend on things-
Brad: … You get things to claim, and I often don’t like pools in my investment properties for those reasons. Whether you get enough rent is the question before, but your covers, your pumps, your filters. The things you’ve got around it. Lights, chlorinaters, cleaning assets, pool .. anything that operates a pool, pretty much, has got some sort of claim usually associated with it.
Brad: But also, providing it’s been built after the appropriate time, you actually get to claim the actual pool itself as structural item.
Brad: There’s a little bit of work that’s gone on there, so it’s not all bad.
Brad: Look, the weighing up a property with a pool as to whether it’s going to increase your rent enough to cover the hassle and the things. The hassle on the costs, but look, at least depreciation makes the cost a bit less after tax, right?
Kevin: Yeah, I mean there’s some real costs with a pool, but you touched it on earlier, and the safety issue is the one that’s always worried me. The liability of the owner to make sure that the safety is always there. That kids are not going to get access to the pool, so therefore you’ve got to make sure that all the fences are right.
Kevin: So just in talking about that Brad, can you give us some, maybe examples of the deductions that an investor may be able to claim for the pool?
Brad: I’ve, in preparation, a few numbers here –
Kevin: Yeah, good.
Brad: Depending on the cost of what they are, but pool fences, two and a half percent. The fence is two and a half percent part of the construction cost. Depending of the cost of that, it’s two and a half percent of what it actually was, what it cost to put it, actually. To build it, the pool itself, two and half percent of the cost to put the pool in.
Brad: I’ve got an example here, $800. Pools and filters, $500 in a year. Diving board, $30. The couch, $80. Table, chairs, $180. These claims all relate to them. We’ve got one example that shows nearly $3,000 in deductions associated to a pool, with a little pool house and a little bit of furniture around it.
Brad: And look, it’ll always come down to a part of the cost to put in that pool there, but look there’s definitely some … We spend on things, or they’re part of the structure, providing their dates are right. They’re worth a few dollars, and get some deductions.
Kevin: It’s what you said, isn’t it? You spend money, and there’s got to be some benefits coming from that.
Brad: Yeah, but it always does have that fear attached. It’s interesting to hear you put two pools in, and filled them in again.
Kevin: Yeah, well I didn’t, someone else did.
Brad: Oh, okay.
Kevin: Oh, we sold them. We sold the houses, and I think one of them became a rental property, and they instantly filled it in.
Brad: Yeah, so they filled it.
Kevin: The other one … Yeah, they developed as some commercial premises, and they wanted to build over the pool. So I guess there were two good reasons. Maybe the first one was a safety reason, I don’t know, but…
Brad: Yeah, there you are, but we in Australia are.. we love to have a swim, we just got to make sure we balance all these things out, right?
Kevin: Yeah, we do all for the right reasons, don’t we? I think when we put our pools in, I think it was really because we had the kids, but I wouldn’t be doing it now, I don’t think.
Brad: Yeah, there’s a bit of maintenance associated with them, isn’t there?
Kevin: Yeah, well it’s enough … Easier to mow the lawn, Brad. Maybe I’m just getting older, I don’t know.
Kevin: Good on ya. Brad Beer from BMT Tax Depreciation. Thanks for your time, Brad.
Brad: Great Kevin. Thank you.28