2) Regarding Rental property (15 Marks)

Dan wishes to purchase an apartment from which he can collect rent before making profit on the sale of the property in three years time. He intends to buy the property in July 2019 and sell it in July 2022. He has determined that he can afford to purchase a three-bedroom apartment costing $480,000 and has identified two suitable alternatives as follows;

Address of property	1 Single St, Brisbanbe	32 Pam Ave, Brisbane
Purchase price (including stamp duty and legal costs)	$580,000	$580,000
Construction date	built in 1971	built in 2001
Construction cost	$ 47,000	$ 230,000
Depreciable assets ( fillings)	$ 7,000	$ 29,000
Remaining effective life (use Prime cost)	4 years	10 years
Annual maintenance fees	$ 4,500	$ 4,500
Annual council and water rates	$ 3,000	$ 3,000
Annual interest on $400,000 mortgage	$ 24,000	$ 24,000
Annual rental income	$ 31,000	$ 31,000
Expected selling price in July 2021	$ 700,000	$ 700,000

In each case, the values of the fillings and construction costs have been verified by certified valuer.

Required

For each property advise Dan on following:

1. a) Provide an estimate of annual net rental income or loss

2. b) Provide an estimate of the net capital gain on sale in July 2022

3. c) Which property will minimise Dans total taxable income from the investment?