Hi,
This may be an old question but I was looking for a response a bit closer to my own situation.
My partner and I live in our PPOR which we are thinking of renting moving from and renting out to a prospective tenant to pay approx $250 pw.
We would then be renting another house at approx $290pw. Now essentially we would be $40 worse off per week – but come tax time I would expect that because this is then an investment property which we can negatively gear – there would be quite a good tax return.
My question is – would the depreciation we could claim on the place , as well as the interest on the loan, and everything else, cover the extra $40 pw that we would need to pay in rent – and also make it worthwhile (ie: give us even more back in the pocket) renting again rather than living in our own home?
I realise that there would be a lot of specifics that would alter the responses to my question but i am just looking for a general response to say ” yes you will end up saving quite a bit in tac come tax time (ie: thousands)” or ” it would probably even out and would not be worth it”
Any help would be appreciated,
Waz11
Hi Waz11,
You right you can get money back from the tax office to keep you cash flow good. But I think when you will sell this property you have to return back this tax etc to get exemption from CGT.
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from Australia in 48 hours
PropertyGuRu,
Im not too worried about the CGT – i realise that if i make it an investment property then i will have to pay this at the time of selling. I am more concerened with my cashflow at the moment..
would it be consider very wise to do it the way i mentioned (would i receivesave quite a lot) or would i only be saving myself a small amount?
Waz11
It’s hard to say how much you can save without knowing you salary etc. roughly may be you can 30% of interest paid by you to bank.
You don’t have to pay CGT for next 6 years if this was your PPOR. but you have to check this with accountant.
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from Australia in 48 hours
So basically if i work out the tax bracket i am in then I work out how much tax i paid on the interest of my loan i can then work out how much i would save on it…
plus then i would have to work out estimations for depreciation … would there be anything else i would need to consider calculate?
Waz11
yes you are right.
I think anything related to that property you can claim like accouting fees etc. but interest and depreciation are major one. may be you want to change your loan to Interest only to give your self more cash flow.
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from Australia in 48 hours
**PropertyGuRu**,
Really appreciate your help here. Is it usually an expensive excercise for a bank to change you from P&I to IO ?
Waz11
It’s all depends on your bank and which package you are on. just ring your bank about it. It should not be too much.
Cheers
PropertyGuRu [sultan]
Mortgage Consultant
[email protected]NZ loan pre approval from Australia in 48 hours
Get a valuation when you move out on your PPOR and you will have to move out for at leat five years otherwise there will be add backs on deprecation that you claim.
However the tax benefits will cover the $40 easily
I reckon getting a professional depreciation schedule done. Costs a bit depending on location but really worth the $ if the house is new-newish. Getting a $5k dep deduction for a 18mth old transportable $230k house was amazing. So if you can get say $4k then I reckon it’s worth about $30/week tax-cash in hand. Then you’ve got the loan interest on the property. Sounds a reasonable strategy to me.
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