Many owners corporations (OC) (formerly body corporates) have a long term maintenance plan to undertake repairs of common areas and general property of the building over a 15-25 year period. The OC collects payments from every apartment owner each quarter to fund these works. For investment owners those payments are tax deductible even though the works don’t take place until some years in the future.
But what about the long term maintenance within your apartment with things like the carpet, painting, appliances, blinds, and cabinetry? All these things wear out or break over time and if they happen around the same time it can cause an untimely drain on funds. If the investment property is held in a super fund or other entity it can be tricky to redirect funds into this vehicle to enable the works to be completed. For larger investment properties like houses there are many more repair costs for roofs and structures as well as major plumbing or electrical that will inevitably occur.
Unlike contributions to an owners corporation for a sinking fund (long term maintenance fund) you cannot set up a tax deductible sinking fund for an individual investment property. You can however allocate a certain amount each month or quarter, for such works inside your apartment so there is a not a large shock or drain on funds. If your investment property is 7-10 years old you may see these expenses for painting, carpet or appliances start to occur.
Apart from the immediate need to replace or repair things in your apartment it makes good investment sense to keep your apartment looking good and fresh to ensure the income is maximised and it doesn’t run into a much larger repair bill in a few years’ time. Also a well maintained apartment will attract a better quality renter who is “house proud” and will look after the apartment ensuring longer term repairs are less frequent.
If you would like specific asset management advice on your investment property please let me know.