Hi,
Excuse my ignorance, I’m new to this so this is probably a simple question. Is the debt on your PPOR treated differently if you eventually move out and rent it as an IP with an interest only loan?In saying ‘treated differently’, I mean does it still have the tax benefits as a normal IP interest only loan or because you have had it as your PPOR, does it lose the tax benefits?
I’ve heard that it’s probably not a good idea to do this, but rather sell, realise the profit and invest this into multiple IP’s. Any help is appreciated.
Will
You get Capital Gains Tax benefits if you lived in it but everything else is the same as any normal investment property once you move out.
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdIf you live in PPOR and moved out you will still get exception from CGT for next 6 years but you need to clarify this with good accountant.
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PropertyGuRu [sultan]
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As long as you don’t buy another PPOR.
I would base the decision on selling on the expected performance of the medium term.
If you want to buy a new PPOR then it might be an idea to sell it and exercise the CGT exemption and move your capital into the new PPOR and borrow 110% for any IPs.
No easy answer I am afraid.
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Simon Macks
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If you move out and rent your PPOR, the interest would be claimable, but if you increased the loan, the extra interest on this portion would only be claimable if the money was borrowed for business/investment purposes.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Thanks for the advice. I guess I can only make the decision when the time comes and options are weighed up. I wanted to stay here in my PPOR (unit) for around 5 years whilst acquiring nuetral/positive IP’s and then hopefully buy my own house with equity. However I can see the potential downside to this ie using equity for non investment. It may be an option that I rent a house?? I’d prefer not to sell the property as it’s in a great area 4km from Bris cdb and the CG potential over time would be great. Time will tell. Thanks for the help.
WillOriginally posted by willdbc:However I can see the potential downside to this ie using equity for non investment.
Hi Will,
You have identified one of the key issues – adopt the discipline required to prevent this from happening. By the way this is an issue for equity realised from PPOR and IPs – it is not confined to PPORs only.
You will find that most successful investors adopt a strong sense of discipline and will even delay any gratification provided by the latest ‘doodads’ in order to create real wealth for themselves.
For me property investment is best described as an accumulation of wealth process and initially there are sacrifices to be made.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Thanks,
I guess this is all about being flexible and open minded to change your strategy as you learn more or the market changes. I’ve been reading about property investment for 6 months now and what I’ve learnt is invaluable.I’ve always thought to pay off the PPOR and use this as leverage-I guess that’s something I learnt from Somers. I guess in hindsight I shouldn’t have bought my PPOR. Maybe I should just get the P & I debt down enough to so I can move out, rent somewhere myself and neutrally/+ve gear the proerty so I can free up some cash flow to put into other IP’s. I guess that renovating my PPOR while I’m in it to maximise the rent I can charge shouldn’t be done while it’s my PPOR, I should make it an IP first, then renovate it to get tax benefits on the money borrowed to do this?? Is this right? Thanks for all the help.
Will
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