Are you a homeowner looking to get the most out of your property investments this financial year? Modular homes and granny flats not only provide an efficient and affordable housing solution but can also unlock significant tax benefits. Here’s everything you need to know about how modular homes can boost your financial strategy, especially if you’re in Victoria because our team at Space Property have done the work for you!
Why Consider Modular Homes?
1) Quick and Cost-Effective Construction
- Modular homes are prefabricated offsite, reducing construction time by up to 40% compared to traditional builds.
- With construction costs averaging $2,500 to $3,000 per square metre, modular homes are 10-15% cheaper than conventional homes.
- In Victoria, you can build a modular home of 60 square metres or less in your backyard without requiring a planning permit, thanks to recent policy changes. This makes it easier than ever to capitalise on unused backyard space.
2) High Rental Demand Near Universities
- With Melbourne’s universities driving demand for affordable housing, a well-placed modular home can become a high-yield rental asset.
- Students seek convenient, modern and independent living spaces, which is the perfect match for modular housing.
Unlocking Tax Benefits
Investing in a modular home as a rental property can open the door to numerous tax deductions (with the help of your trusted Accountant, of course), including:
- Mortgage Interest: Deduct interest paid on loans used to finance the property.
- Council Rates: Claim rates paid to local councils.
- Energy Efficiency Rebates: Offset costs of installing energy-efficient systems.
- Depreciation: This is where modular homes truly shine.
What is Depreciation?
Depreciation is the gradual loss of value in a property’s assets over time due to wear and tear. For income-producing properties, such as rental modular homes, this depreciation can be deducted annually from your taxable income. This includes:
- Building structure (over 20 years for modular homes).
- Fixtures and fittings (such as appliances, carpets, blinds).
How Depreciation Boosts Cash Flow
A tax depreciation schedule from a qualified quantity surveyor provides a detailed breakdown of all claimable depreciation amounts. Let’s consider a real-life example from one of our customers:
- Property Type: Two-bedroom modular home.
- Annual Rental Income: $18,200 ($350/week).
- Expenses: $21,000.
- Depreciation Deduction: $7,000 (first year).
Without claiming depreciation, the property runs at a $2,800 pre-tax cash flow loss. By claiming depreciation, the tax loss increases to $9,800, resulting in a refund of $3,626 (based on a 37% tax rate). This turns a weekly loss of $34 into a positive cash flow of $16—a $50 improvement per week.
Dual Income Potential
For savvy investors, combining a modular home with an existing rental property on the same lot can double your income potential. A dual-income property means:
- Separate depreciation claims for each dwelling.
- Increased cash flow and overall ROI.
Maximise Your Depreciation
To maximise your benefits:
- Hire a Quantity Surveyor: Obtain a comprehensive tax depreciation schedule for your modular home.
- Claim Pro-Rata Deductions: If shared spaces (such as pools or outdoor areas) are used by both tenants and homeowners, partial deductions can be claimed.
- Act Now: Depreciation benefits are highest in the first year, so start early.
Why Now is the Perfect Time
With Victoria’s recent policy changes and increasing demand for rental properties, there’s never been a better time to invest in a modular home. Whether you’re looking to supplement your income, increase your property’s value, or maximise your tax return, modular homes provide an unparalleled opportunity.
Ready to learn more? Contact us today to explore how a modular home can transform your investment portfolio this financial year! Plus, with every purchase, we provide you with a comprehensive tax depreciation report to help you maximise your returns from day one.
BOOK A FREE CONSULT TO LEARN MORE.
