Rich Harvey

Well, if you look at the tax rules, buildings can be depreciated over a 40-year period.

So 2.5% over 40 years is the general rule of thumb.

And if you want to get an accurate, and I know every property investor should do this, they should get a building depreciation to really give you all of the nuts and bolts of how depreciation works.

That's essentially from a tax perspective how depreciation works.

So you can depreciate the building and also the fittings and fixtures within that building as well.

And everything like carpet, lines, they all depreciate at various rates.

Some depreciate faster than others, but they don't go back to zero just because there's a building that's built 50 years ago.

There's some beautiful properties in the inner areas of our cities and on the coast that are worth a lot more today.

They might be heritage listed.

Look, it's really important to understand design.

And look, architects are very much worth their money.

If you could imagine you've got half a million dollars to spend on a building, okay, you've got a plot of land and you can think, okay, look, I can put a three bedroom, two bath, double garage home with a good kitchen, open plan living, fit outs, you know, going to be above average, put in some nice quality fixtures and finishes.

So that's going to appeal to a wide range of local buyers as homeowners or renters.

So that's one option for your building structure.

Second option, you could spend that same $500,000 and try and squeeze eight tiny one bedsits onto that same, you know, and it might have a shared kitchen, shared bathroom facilities, and it's really cheap fit out of appliances.

And you do a really bad design and really cheap colours and just everything just looks...

crappy, right?

So what I'm saying is you're spending the same amount of money on each, which one is going to appeal to the broader market?

What's your exit strategy when you think about selling that property down the track?

The one bedroom, the eight to the one bedrooms might generate a reasonable income, but it can only ever be sold to another investor and it's not going to have very, very broad appeal.