Learn to track renovation costs in real time using tools like Shoeboxed and ScanSnap, standardize trade quotes to compare apples to apples, and understand which expenses count as repairs versus improvements for tax purposes.
Chapters
A budget is next to useless unless it is actively monitored. This is painful because the last thing you want to do after a hard day's work is enter all your receipts and expenses into the actual column in your spreadsheet. But this is exactly what needs to be done to manage your budget. You need to know when blowouts are happening and when and what to do about them. However, there's good news. Thankfully, a product has come along to make this such a much simpler task. It allows me to track my budget almost in real time without the need for all that data entry. And that is Shoeboxed. Shoeboxed is an online service that takes your box or receipts and pulls the following data from them. Automatically takes the amount the bank account used, the name of the supplier, and the date. So while you're at the store, you can take a photo of the receipt with your phone and it is automatically uploaded to their server on the spot. And remember later what you can do is you can go through and actually move that amount into one of the columns that we've set up before. Remember those 19 categories I gave you above? Alternatively, if you choose, you can actually send them your receipts in a prepaid envelope or or email them to them. You can drag and drop them from your computer, or you can use a small automatic scanner. Let's have a look at that scanner. The Fuji scansnap and Shoebox work seamlessly together. Now, when I get home, instead of painstakingly entering the data from the receipts in my spreadsheet, I stack them up on the scanner and press Scan. You simply place all the receipts on the scanner, press Go, and they're beamed up into the cloud for data extraction. Once a day, log onto your account and manually sort the receipts with a click of the button into the categories we just discussed. Now this can take two minutes. Then check the total amount of each category and add it to the corresponding actual column on your budget. You could go a lot further than that and enter every individual item on the actual column, which would still be pretty fast, but just the total might be sufficient to keep you track of your spending and your budget. Best of all, come tax time, your bookkeeper or accountant can easily access the data online, which is a huge saving of their time too, and cost you less. When you are determining your budget, you initially may have no experience and worry how you can do this. During your due diligence stage, your building inspector may have indicated costs of fixing or doing things. If doing a structural renovation, then some of the tools I mentioned above may help the Reality is, if you don't know how long or how much time things take, you have trouble doing the costing. You may as well get your tradies in to help you. So write down everything you want to do in every room, then break it up into each trade's duties for each room. Now you have a list of things that you want done by the trade. Then you get your trades into quote. Now, if the electrician asks you if you want dimmer switches, ask the price difference. If you decide that is what you want, then update your list for all the other traders who are going to quote on the same job. That is I want dimmer switches. You've come up with some really good information from one of the trades and you've updated the type of work that you want done. That way you're actually comparing like with like. If the plumber asks you if you want a double shower, you then if the answer is yes, then go back and update your specifications and get all of your trades quoting on the double shower. So when their quotes come in, they're for the same works as the quotes come in. You'll get a feel for the time and the total cost of what they're doing. They'll also suggest improvements along the way. Sometimes this is to make their job easier, so make sure you cross check that. Pretty soon you'll know not only who the helpful tradies are, you'll know what jobs will cost as well. Now, if you have a project manager, get them to help you do this. They'll help you pull out what tasks per room are required against your specification list. Now you're paying them, remember, so they're there to help you use them. Remember to check your time frames. If you found the best tiler but he's not available for three months, then that's not going to work for you. If your renovation strategy is buy, renovate and hold, then depreciation might be something that you need to discuss with your accountant. Now, obviously I'm not an accountant, but I'm going to give you a few tips so that you can go and speak to the professional about this. You can't assume that you can claim for renovation works or improvements that have already been done. You might have the ability to claim depreciation on any past works done that aren't part of your current renovation. So you need to check that. Now, this is pretty complicated. Tax deductions are available for works done for repairs and maintenance. Some of what you invest in your renovation is tax deductible and some isn't. Here's a list to help you gauge whether you will be able to recoup some of the money you've sunk into your project through tax credits and deductions. Firstly, repairs and maintenance. These are not improvements because improvements are not deductible. For example, if the house needed painting when you bought it, then painting would be an improvement, therefore not tax deductible. On the other hand, if during the time of your ownership the paint starts to peel and you repaint, the expense could be a deduction. Now you do need to check this with your accountant. No deduction is available for your own labour. You need to remember that you need to check with your accountant regarding when repairs are deductible. It may be conditional on if and when the property was actually rented. A repair can become an improvement if it does not restore things to their original state, that is Replacing a metal roof with tiles. As long as the benefit is only minor or incidental, it can still be considered a repair. Now, before you buy a property, these are some things you might want to ask the scope of the works done on renovations that you can see have been done in the past, the date at which the work was done, the cost of the work, and whether the work was a type that it qualifies for a Division 43 deduction. Now you probably also want to get some warranty insurance on the work that has been done, especially if it's within the still claimable time. Now here's a hint from get the property reviewed by a quantity surveyor before for the renovation so they can ascertain correctly after the renovation what valuable goods have been added. Now remember from the last module you might even ask the vendor to throw in their depreciation schedule. Now I've got a bonus for you in the bonus section on a scrapping schedule for some of the things that you pull out of your property. You can actually probably deduct those immediately, so grab that bonus. Here's some websites where there's more information on depreciation schedules. Bmtqs.com depro.com and washingtonbrown.com so in this module we've looked at how to interview your tradespeople and how to plan the works that need to be done. I've also shared with you some tools that will assist you in doing this. Completing a renovation on time and on budget is actually the key to a successful renovation. And now you have all those tools. So let's move on to the next step. Hooray. We've finally made it to site. Now, we're going to take you by the hand to look at an actual renovation and how to add value, so let's get going.
