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Monday 28 May 2012

To lease or not to lease?

A leading Port Douglas accountant says greedy landlords are a minority as more town centre shops become vacant.

Speaking with The Newsport, Brian Hoult from MGI Chartered Accountants said the need for landlords to simply meet their own financial commitments was more likely the reason for not negotiating rental amounts with their tenants than greed.

"The problem with a lot of people would be that they bought these as investment properties. They probably bought at the top of the market when times were good and a lot of them would have borrowed to do that," he said.

"So they've got certain commitments they need to meet with the bank and therefore they need to try and chase higher rent to meet their commitments.

"A lot of people feel there might be an element of greed, and that might be the case with a minority."

He said some interstate landlords may not be fully aware of the economic difficulties faced by their far northern tenants, while others are quite happy to renegotiate lease agreements.

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"We've certainly got some clients who have been able to negotiate with their landlord and get very good deals where their landlord realises that they do have to compromise to get 'x' amount of dollars per week rather than nothing at all.

"Those people are probably the ones in a better financial position and are able to do that."

Mr Hoult said there are no additional tax incentives available to landlords who have vacant premises.

"People who borrow money, it means the investment is effectively negatively geared so it creates a tax advantage for them.

"However, the tax advantage is about 30 cents in the dollar so at the end of the day you're far better off having a tenant and getting rent than just getting a tax advantage at 30 cents in the dollar.

"You wouldn't deliberately say 'I'm going to leave my shop empty because I'm going to get a tax advantage', it doesn't make sense."

"If I was a landlord and in that position, I would be happy to negotiate and get a lesser rent, within reason."

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Liz Wilson, , 30-05-12 16:44:
Negative gearing is still a cash flow loss no matter how you look at it, so Brian has a point. "Tax advantage of 30c in the dollar" is a fancy way of saying it's actually a LOSS of 70c in the dollar, you are hoping that you get that money back by making a capital gain on your investment. It's likely these landlords cant sell for what they bought either.

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