Hi all, i know a few of you are doing this and some have moved out/sold up and started renting rather than owning a PPOR..
What have you found to be the PRO’s and CON’s ?
And cost wise..what would you say is the better deal?
I know this one’s a bit harder, as most PPOR’s have achieved above average CG of late..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorredwing,
that is exactly what I have done. I have sold all my Australian property including my PPOR. I did this about 8 months ago now with the view that the Australian property market had peaked and I would take my gain (pay capital gains tax – except on my PPOR) and then wait for prices to fall and reinvest.
At the moment I am living in a very expensive area of Sydney in a $3 million dollar apartment for $1,000 per week. Taking into account interest on such a loan, strata fees, water rates, land tax, repairs and maintenance (although this would be low given it is a new apartment) then I am definitely ahead. I will definitely reenter the market once it has cooled but I will then be able to purchase a now $3 million property for around $2 million (and yes I do believe these drops will occur – I think we have another Hong Kong market on our hands). Im planning on renting for another 2 years and then look at reentering the market. I did the same thing in the late 80s after negative gearing was removed and people thought I was a fool. Well those people are the ones who have just paid of their PPOR and have one investment property and a standard motor vehicle. Never listen to the herd, they will just loose you money.
I did something similar too. Did you know you get get the best of both worlds? ie rent out your PPOR, claim deductions and rent somewhere else(which would be cheaper) and still claim the PPOR CGT exemption for up to 6 years.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi,
We did it about 7 months ago also.
We didn’t want to keep using a LOC, which was right up at it’s limit. With interest rates on the rise, we can sleep better at night knowing that all of our properties have a max LVR of around 70% rather that 105% with LOC.
You do miss it though, when you have owned your own place for a long time!
Regards,
Del
Originally posted by Terryw:Did you know you get get the best of both worlds? ie rent out your PPOR, claim deductions and rent somewhere else(which would be cheaper) and still claim the PPOR CGT exemption for up to 6 years.
Absolutely!!!! That is a fantastic idea Terry, and I guess it’s really important (for any newbie reading this post) to (over)stress the CHEAPER THAN part of your sentence; that is, not much value in this exercise if whoever does this pays equal or more than what they are getting in rent for their PPOR!!
Cheers,
Jo
Redwing,
Instead of selling up, I rented out of my previous PPOR and am now renting myself. I have rented two blocks from where I used to live (which means my walk to work is now 7 mins instead of 15).
I am paying approximately $400 month less (although I am staying in a smaller place/older place – this was done deliberately though). Of course all other costs ie rates, body corporate, insurance etc are now tax deductible. This is worth about $4000 annually, which I can now claim on tax.
Given the market conditions around Southbank/South Melb (where I currently live and work), I will be renting indefinitely into the future. It is a far better financial decision to rent in this area than to own, given some of the uncertainties around in the inner city apartment market.
For example, very broadly a recent 2br apartment would cost ~$380k, to rent would be about $350 per week. Even on a 80%LVR, mortgage payment is ~$2144, compared to a calendar month rental of $1517.
I can do this quite easily as I am living by myself and don’t have to take into account a girlfriend/partners’s wants/wishes. I don’t think it is intuitively positive for this concept to be accepted by most people. ie renting is wasting money etc
When my lease expires at the end of this year, I am looking to upgrade into some of the newer properties in the area. This would reduce the monthly benefit from $400 to $250-300, although I would be living in almost new accommodation and nice views. This would also mean a 1 minute work to work. Best not tell my manager, especially if I am running late in the morning.
James
Thanks guys, I’ve found this a very interesting topic. But what about first timers, do you think it’s better to rent and gather IP’s, or buy your first home (PPOR) and then gather IP’s?
Thanks for the post’s all, it’s food for though, i like the idea that any problems with the property i.e- hot water syatem, air cond, stove etc etc are the Landlords problem…less cost to me if renting..
and conversly if i rent my PPOR then any repairs are Tax deductible..
The best of both worlds would be to rent somewhere where you knew you wouldn’t be moved out in a hurry..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Redwing,
i quite agree with the guys above, my ppor, which is currnetly rented out, is gaining and collecting as many tax deductions and benefits, once there is enough cashflow, to cover weekly repayments, will be moving into it directly,
…now its a choice of either using the equity in it or setting up a line of credit against it, to then fund and purchase another ip.
Cheers,
sisthere are many interesting angeles to this idea. as Redwing said – the length of stay is important. It could be worth approaching some investors (or even mates – but keep it all arms length) to custom build a house for you and offer them a 7 year lease. Could even do that with a new house that has been fully built – many investors would jump at a long trem lease possibility. For the ATO you need to keep it all amrs length, but you coud always team up with a good friend and buy a house for each other and rent at commercial rates. If you build on a new estate with a similar design there will be no arguments about who is getting the best deal – or 2 new apartments that are very similar etc etc.
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
Originally posted by Terryw:I did something similar too. Did you know you get get the best of both worlds? ie rent out your PPOR, claim deductions and rent somewhere else(which would be cheaper) and still claim the PPOR CGT exemption for up to 6 years.
Terryw
Discover Home Loans
North Sydney
[email protected]Terry I assume you moved states or something to achieve this tho? Reading http://www.ato.gov.au/individuals/content.asp?doc=/content/29092.htm&pc=001/002/026/004&mnu=5060&mfp=001&st=&cy=1 I don’t think you can just willy nilly decide to do this – do you have to take a long overseas job holiday or job transfer to somewhere to qualify??
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
John
The legislation says nothing about having to move interstate or job transfers etc (nor does the link you provided). As far as I am aware, you could move next door and still claim the exemption.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terryw,
I read the first two lines:
“If you leave your main residence temporarily, you may want that residence to be regarded as your home while you are away. This may be the case, for example, if you move because of a temporary job transfer, to study overseas or to take an extended overseas holiday.”
which suggested it had to be for some legitimate reason, not just wanting to move next door. I’ll need to get hold of the legislation and read it as it coud be an interesting strategy. My concern would be that the ATO could argue that the only reason you moved next door was to minimise tax and apply some of their lovely avoidance provisions. It’s great news though if you can do this – will cetainly look into it more.
Extensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Aussiemike,
For your sake,I hope you’re right,about property prices falling. If you’re wrong you have sold your PPOR and you are renting at a cost of $104,000 in rent (two years rent).If property prices rise you are well and truly up to your neck
in the shyt.
A woman sold her house in Mosman(Sydney), intending to buy better.By the time she found “the” house, prices had left her behind.
She couldn’t afford any properties in Mosman. Had to move to a lesser suburb.
SHYT HAPPENS!!!
Let’s hope it doesn’t happen to you.[buz2]Trust me, I’m a real estate salesman!!!!!
bbruham.Originally posted by g7:Thanks guys, I’ve found this a very interesting topic. But what about first timers, do you think it’s better to rent and gather IP’s, or buy your first home (PPOR) and then gather IP’s?
I suppose Im not quite a ‘first timer’ as I lived at home (much cheaper) and bought IPs. I think if I were to move anywhere, I would get one of my rellies (or my family trust probably) to buy a house that I could rent from them. That way I can still have the same benefits as a renter, plus I don’t have to worry too much about getting permission to do anything….
Cheers
MelThanks for your reply Melbear, but I’m not in that situation, I’m on my own, what do you and others reckon, buy PPOR and accumalate or rent and accumalate?
G7
G7 :o)
I’ll give it a shot answering you from my experience. I checked out your profile and you’re 42. I am 37- I am not sure of your situation, and it might be really different than mine.
I’ve never really been able to afford my own home. I probably thought that was a bad thing in the past, but now I see it as a reasonable part of “fate”, given that tax concessions are generous for IP owners but not PPOR owners. There was a post on another forum about people renting… and they all said they “chose” to rent… [baaa] Well, for some of us, it’s an economic imperative, rather than a real “choice”.
However, having rented all of my life, since I was 19 and moved out of home, I think that to develop a portfolio of IP’s is a good thing! [biggrin] I actually don’t know if I will *ever* own my own home… because I would have to sell up my IP’s and buy myself a home- forgo the income of them, to have that one major “asset”. If one can rent cheaply, and comfortably, and safely… and one loves one’s rental property… then I think it’s a worthy alternative.
Having said that though… as I said, it’s not a real “choice” for me to rent (at least I’m honest!) so I can’t be purely objective about renting Vs PPOR, because to do so I would have to be able to do both- in fact, I can only do one of them :o)
So even thought it hasn’t been a “decision” for me to rent- it’s a necessity, the outcome for me has still been quite good
kay henry
I rented out my PPOR back in Jun’03 and it save me a lot of money by doing so. You can claim all the deductions and rip the benefit. The only problem about renting is that you just got to move and live somewhere if the landlord kick you out. I am fortunate because I rent from people that I know and I treat the current house that I am renting as my own.
Kind regards
Jet Dollars
[Retire Young, Retire Rich] [strum]Kay Henry,
Just a thought!!!
My PPOR was purchased for thity-six thousand dollars.
Today it’s been valued at over nine hundred thousand dollars.The repayments were two hundred and five dollars per month.
If I had too pay rent on the same place,what would the rent be today?
Little Kay, it’s time for you to jump into your own place!
Your investment properties will do for now.
Own your own!
Yes you will save a few dollars on deductions etc,
but if you ever sell your PPOR it’s tax free.
If I was starting over I would only be buying PPOR properties.
Buy,do up,taking your time,sell and repeat.
Right location, you’ll sell for four million dollars. repeat often!!
My mate did this.He retired in eight years, with three million dollars in the bank,after buying his last PPOR.
He only works part time.
Smart bastard!!!![cap][cap][cap]
bbruham.
Work smarter,not harder.P.S. A criminal thought has entered my evil head!
kay, buy your PPOR and rent it to yourself. The taxation office has never said to me “who are your tenants?”
No property insurance needed. No property managers required.
As a postal address, just use the families or friends.Thanks Kay, I really appreciate your detailed response, it was a great help. There’s only one problem though…
I’m 22 not 42 [blink], how did that happen, I never entered my age on the personal details bit, but anyway Kay you’re ahead of your time by 20 years, what are prices like in 2024?[tongue]
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