Top tips for managing your property portfolio

Here are a couple of tips to make tax time less of a chore:

1. Keep a folder for each property

Set up a lever arch folder for each property and divide it into sections such as contract particulars, cost base items, bank statements, yearly expenses, rental statements, lease agreements, etc.

2. Go paperless

Set up e-statements for any investment loan or offset account. Not only will this help save a few trees, it will keep your mailbox less cluttered. You can download any statement from your internet banking within a certain period.

3. Get your managing agent to pay bills out of the rent

Most property managers will offer a free service to pay any bills – such as strata fees, council rates, landlord’s insurance and maintenance expenses – out of your rent, and then deposit the balance to your account each month. Not only will this create less work for you throughout the year, it will also make tax time easier, with a single yearly rental statement from your property manager with all your income and expenses.

4. Keep a spreadsheet of expenses

Even if your property manager pays expenses from your rent, there will still be the odd invoice you will have to pay personally. Keep a spreadsheet of these items to take to your accountant. It is important to identify what expenses go on the cost base of the property to reduce your future capital gains tax liability, and maximise what can be claimed in your yearly return.

5. Set up a basic Xero or MYOB bookkeeping account

If you have a few properties in your portfolio, you could go to another level for around $10 per month. Set up a basic Xero or MYOB account and feed your bank statements and loan account information into the accounting software. This will automatically recognise entries, for easy reconciliation and tax preparation.

6. Understand your cash flow

In a low interest rate environment, you may find your investment has positive cash flow after the yearly tax deductions of expenses and depreciation. However, you may find the holding costs throughout the year are negative, and would therefore need a buffer to maintain the investment before your yearly tax return. Generally, we advise keeping two to three years’ worth of holding costs as a buffer, which can drip-feed the shortfall over the year and then be replaced with your tax return. Alternatively, you can ask your accountant for a tax withholding variation form, to adjust your week-to-week tax to reflect your allowances for owning the investment and receive the return immediately in your pay cycle. Some find this helps with cash flow throughout the year – but you must be more diligent not to spend it!

Hopefully these tips will make it easier for you to manage your investments and spend more time doing the things you enjoy!