PM not cooperating with depreciation asset list

Hi guys and girls,

I have decided I want to go with Depreciator to have a schedule written for my IP in Ballarat. However I live in Tas so I am not able to personally complete the asset checklist and provide photos. It was my understanding that my PM should be able to assist me with this.

Is this a reasonable (and common) request of PMs? I don't know how I will get it done otherwise!

The PM has replied to my request by sending me through a brochure for their preferred company, saying they are local and can do it themselves.

 

They would have a local data collector who can go in and get photos etc. Maybe go with them if they are cheaper? I'm assuming it's a pre 87 built property with not much in the way of renos.
Most PMs are happy to do this sort of thing. I reckon every investor should have a heap of photos of a property before they let tenants loose in it - great to have for repair and tribunal issues. I don't think it's unreasonable to expect a PM to get those photos.
Maybe the PM is getting a referral fee?

 

I am suspecting the PM is getting a fee because the Real Estate's and the Depreciation Company's logos are at the top of the brochure she emailed me.

The PM does send us the odd photo when they do inspections. And we have photos pre-tenancy but there definitely aren't enough photos which show all of the assets in detail.

And yes it is a really old house with no renovations.

 

I really want to go with Depreciator! I am having some trust issues with other companies at the moment.

 

The role for PM has seemingly evolved over the years from what should essentially be managing the tenancy and aspects of it, to now being all things on behalf of the landlord. This is not the role or intention of property management and whilst some PMs will indeed venture outside the scope of the traditional role, as investors we need to realise that there are liability issues and skills and expertise that are not encompassed in the role.

As an example, a property manager is often asked to complete a pre-settlement inspection of a property. Without going into all of the details, this immediately presents many liability issues as a property manager is neither trained nor should be expected to provide the investor with a reasonable assessment of a property with respect to the contract. That is function of the buyer and/or buyer's agent. Another example is overseeing renovations. There is a grey area with respect to what could be considered routine maintenance e.g. replacing carpet or allowing access for a repaint and the transition to more complex tasks such as installing a new kitchen.

Again, property managers are paid for providing the medium between you and your landlord and handling aspects of the tenancy itself that pertain to the well being of the tenant.

I'm an experienced investor myself with multiple properties and I don't feel handing over the task of itemising assets for a depreciation schedule is either fair to the property manager, nor will ensure the best outcome. Pre-settlement inspections and depreciation inspections are best outsourced to professional companies who have the knowledge and expertise to complete them properly. I very much doubt that the property manager is trying to be sneaky or is being lazy - they're simply putting a boundary between the role of property management and complete asset management. Each agency is different and although some may help, you will definitely achieve better results for higher level tasks by employing appropriate professionals to complete them for you.

Hope that helps!

 

Yes that does make sense MyPropertyPro.

 

I am also an experienced investor with multiple properties and I would feel perfectly comfortable with giving a PM a checklist and asking them to visit an unrenovated pre 87 built property of mine and take a bunch of photos.
There are hundreds of diligent and professional PMs all across the country who do this all the time.
But Job21, if the PM won't play ball you probably don't have much choice. A local data collector will go in.
I reckon you're crazy, though, not having a full set of photos of the place. Like I said, I think every investor should have a heap of photos of every property and I don't see why a PM should not be willing to go in and get them. My PMs have always done that.

 

And depreciator invented the depreciator report so knows a thing or two

 

No, we just jumped on the bandwagon - and I came up with that great business name. I think Deppro were the first big players here in depreciation. We started about 14 years ago and they were well established. We don't hear much about them these days.

 

And for newbies it's actually called a depreciator not depreciation like some may Val it

 

Is this for Depreciator to do a remote depreciation schedule? I'm assuming the PM would have no issues if a Depreciator rep went and did an inspection and did all the work themselves which is basically what they are saying they are happy with by sending you a link to a local establishment.

I wouldn't expect my PM to do more than take a few photos at the next inspection but probably not do a checklist - how long is this checklist?!?!

 

I agree that every investor should have photos of their investment, however this should be done upon purchase and then on everything ingoing and outgoing inspection.

My main point is that providing the investor with additional related investor services outside of the scope of the management agreement is not the role of the PM. This why some agencies will not provide that service and are well within their rights to do so. It does not make them less professional or less diligent anymore than asking your solicitor to write letters on your behalf for which you have not engaged nor paid them makes them less professional or diligent.

As with anything, you get what you pay for and overseeing renovations, providing tax related services (such as depreciation schedule inspection services) and other non-tenancy management items are pushing the cost/benefit envelope of what we generally pay property managers. Every time a property manager has to enter your property for a service that is outside the agreement, they are essentially providing that service for free. Some agencies will exercise discretion to keep a client happy which is obviously to the advantage of the investor. Services levels are generally reflected by the fees and if one is paying less, then they should expect less of a service. If your fees are on the higher end then I would probably expect my PM to exercise discretion on some services however I still believe to get the result, you should generally pay the appropriate person to complete the task.

Every investor and PM is different though. All the best obtaining your desired result!

 

Yep, we're always happy to send someone to a property - and charge more, of course. For a pre 87 built property with no renos, this seems overkill. But that's just what I think. There will be about a dozen Assets.

 

My opinion is that if they are having to follow a checklist in detail then simply arrange an hourly rate for their time.

The photos should be part of their standard job.

 

I have just spoken with my PM. She has never been asked to do this before and was wary because of the implications if she accidentally missed something - and I totally understand that. Thanks everyone for your input.

I think it would be great if a PM does this for their landlords, but totally understand why they would choose not to. And I really like my PM so I will respect her decision and go with a local. It's a real shame because I would have liked Depreciator to have done it but there will be more IPs in the future. I guess it never hurts to ask the question, if the PM says yes then that's a bonus! And if they say no, then that's ok too.

Thanks again everyone.

 

Yep. Takes less than an hour.

But Jog21, as you said, you don't want to rock the boat with your PM - especially in a regional town when you are interstate - and that makes sense to me.
We deal with thousands (yep, thousands) of PMs every year and there are some pretty evolved ones out there i.e. ones who see their role as assisting a landlord to 'manage' their investment in ways that go beyond the traditional and narrow PM role.

 

I do it from time to time, but normally try to line it up with a routine inspection.

A lot of the time I probably already have everything from the ingoing if I did it.

In saying the above though, it isn't really my job and there is the possibility I won't be able to give the same information as a QS and it's usually better for an investor to pay to have the QS attend.

 

@Depreciator Is this checklist new? I don't remember having to provide you guys with it previously. You would have done about 5 remote schedules for me already from photos.

 

Hi Jog21, I've never been asked to complete this sort of checklist and to be frank, I'm not sure how it would stack up if the ATO audited it - my advice to my clients is and will always be to get a qualified professional to undertake any task - regardless of its scope. My suggestion to you would be to engage a Quantity Surveyor - the reports I've seen are very, very comprehensive and will benefit you for the next 15 or so years.

 

Okay, time to clear up a few misconceptions (and deal with a bit of fear mongering).

If ALL the costs are known, anybody can prepare a Depreciation Schedule. The rules are pretty clear. There are few ways to maximise things that not everybody knows, but if the construction cost and Asset values are available, it's not hard to put together a Dep Schedule. (Yep, I'm shooting myself in foot there.)

Now, read this carefully:

IF THE CONSTRUCTION COSTS ARE NOT KNOWN, the ATO will permit an 'appropriately qualified professional' to estimate those costs. Quantity Surveyors are up the top of that list, then there are Estimators and others. Estimating historical construction costs is the tricky part.

Anybody is allowed to work out the written-down value of Assets: appliances, carpet, HWS etc etc. The ATO believe it takes no particular qualification to estimate the written-down value of, say, a stove. But understandably, most people would rather somebody else did that.

Now, let's get back to the property in question. It is a pre 87 built, unrenovated house in Ballarat. The only depreciation will be in the Assets. Jog21 could theoretically estimate the value of those Assets him (or her) self. His/her accountant would then know what to do with those costs. This is absolutely okay, provided Jog21 understands how to estimate the WDV of the Assets.

Alternatively, Jog21 can engage a third party to put together a Dep Schedule. We are more than happy to send a quantity surveyor there (and charge accordingly) to inspect the place and value the Assets. We would find at least double our fee in depreciation in the first year.

But I think sending a QS for such a simple job is overkill. So we offer a low cost alternative. It makes no difference to us which method people choose.

Jog21 has a good relationship with his PM, so it is important to not upset that. The local person is unlikely to be a Quantity Surveyor or anything like that, but with this particular property that does not matter because it is only Assets being valued.

Scott