I wish to maximise depreciation; how do I find the best quantity surveyor? Ask Margaret

Hi Margaret,

I have recently bought an investment property, and wish to maximise depreciation.  In the market there are so many quantity surveyors, how do I go about finding the best one? Are they all the same?

Many thanks, Daniel


Hi Daniel, 

Maximising depreciation on a property is really important, as it adds to the cash flows and can turn a previously negatively geared property into a positive cash flow one.  Even in a low interest rate environment, the possibility of achieving a positively geared result in your property investing (where raw rent exceeds raw expenses, and you pay tax) is limited to those areas with unusually high rental yields – these are usually areas based on one industry and with a greater risk to the investor. 

Where you have purchased in an area with more normal yields in the 5 – 6% range, on paper deductions, which are items which do not add to the expense ledger, can result in extra tax back.  This extra tax can plug up that shortfall between what comes in and what goes out and help you to stay in the market longer, as your holding costs are more well covered.  

Finding a quantity surveyor who is going to maximise these deductions is an important part of the investing process.  Understanding how they perform their calculations can help you to narrow down the good ones.  

The depreciation allowances themselves do not change from company to company – there is a prescribed amount which can be claimed on plant, equipment and buildings and the period of time over which they can be  claimed is  also prescribed, in the main, by the tax office.  It is the way that a quantity surveyor does their estimating that creates the difference in two different reports from two different companies.  

A quantity surveyor must, in effect first look into the past to establish what the original construction costs may have been for your property.  Then, they must estimate the value of the items within the property such as carpets, curtains and light fittings.  The first part is easier as there are tables which outline construction costs according to the years in which they were effected, but estimating a second hand value on an item for which you do not know the original purchase price is where the skill comes in.  

I’d suggest that first of all you ensure that the company you choose employs only duly qualified people and has a fairly long history in the business.  I like to choose companies which do a lot of the larger work too – the ones who do the big commercial and industrial estimating, as this is harder and requires a greater level of skill.  Next ask for a copy of a sample report, and then compare them across a couple of companies – these sample reports often contain similar sample properties so you can see how they differ.  

Lastly nothing is as good as a testimonial from satisfied clients.  Ask if they have happy clients who are willing to talk on their behalf, and whether it’s OK for you to contact them or be contacted by them.   If they can provide people who use them over and over again, this kind of testimonial can tell you much more than you can ever know from asking the company itself if they think they are good.  If they cannot provide this type of testimonial, there could be a good reason why!

Regards,

Margaret


Margaret Lomas
is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and heads up the panel onYour Money, Your Call, both on Sky News.

She is the founder of Destiny.

Have a property question? Ask Margaret!

 

Margaret Lomas

Margaret Lomas

Margaret Lomas is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and Your Money, Your Call, both on Sky News. She is the founder of Destiny.

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