Most homeowners are familiar with depreciation reports, as it is an effective tool used in managing their properties and assets. However, for those who have no clue about it, a depreciation report is a management tool that helps owners/strata corporations plan and pay for the replacement or even repair of their assets such as roof, windows, utilities, roads, etc. and protect their homes and properties.
It also provides useful information to potential home purchasers. However, the quality of the report depends heavily on the knowledge and expertise of the company or individual preparing it. This is why it is very important to hire a competent person or company to handle such an important task. Washington Brown is one of such companies that is trusted and respected in the property depreciation business.
So, what does a depreciation report look like?
The depreciation report has a lot of components, as it tells owners how much replacement or repair work is needed, their approximate cost and the times these costs will occur. Whatever information is given, it must be meet all legal requirements and conditions. Nothing should be over the top.
For the sake of persons that may not be familiar with the complicated and technical words, the depreciation report should be presented in simple, clear and straight-to-the-point terms. It can also use tables to represent information such as assets, expected cost and approximate service life and should also include an executive summary.
The depreciation report should also make provision different funding plans for maintenance expenses and long-term repair costs. The provision can include paying special levies, paying from a contingency fund reserve, acquiring loans or even a combination of all; whatever can be used for funding.
A standard depreciation report usually contains:
- A description of the plan: Methods employed, different assumptions made, and clear definition of the terms used
- A data sheet for the different property items and their material descriptions including any abnormal deficiency, their lifespan (including their current age), the estimated time it will need a repair or replacement and the costs associated with it
- Several photos are showing the strata company the condition of the properties and assets to help them understand it better and give a general opinion of the building.
- It should also give different ways the owner can save money by explaining to the owner that it is much better to replace an item with inexpensive but quality material than continuously repairing it, and providing water conservation and energy efficient options
- It can also suggest some preventive tips to help the property last a long time.
- A summary schedule
The main aim is to provide the owner with satisfactory work that will protect lives and the properties involved, so it is important that the report shows what building or asset needs to be repaired first.
What is not in a depreciation report?
A depreciation report does not cover every single item in the property. For instance, the foundation that is meant to last through the lifespan of the building is not included, except a fault is noticed early. Also, it does not cover everyday repairs and maintenance, that is, repairs that are done every month or year.
Why are depreciation reports important?
It is very important as it helps:
- To plan for the long term: It helps the strata company plan for long term expenses so that nothing takes them unawares.
- Lower costs of operation: Depreciation costs contains different strategies and preventive tips the owner can employ to reduce operating costs.
- To protect your assets: it helps to gain adequate capital to maintain your property, especially if there is a contingency fund for the building.
- To follow legal laws and requirements.
