Hi,
I was hoping someone might be able to give me some advice. I bought a unit in DEC for $330,000 in sydney what would be the best thing to do to try and build equity in the property to buy a house? Can we get good tax breaks if we move out and rent the property and then rent a cheap place to pay more off the loan?
Or are we better off to just stay put and pay as much money as we can into the mortgage,
Is there an easy way to work out tax breaks on a property?
Any advice would be appreciated.Thanks
Mel
Nel
Convert the property to an interest only loan and link a 100% offset account to it.
Then pay all of your income into the offset account.
This will give you on call cash funds to be used as deposit on a future property as well as the interest savings.
More importantly Flexibility.
Richard Taylor | Australia's leading private lender
Hello Mel
The best way to answer your question for yourself is to do the maths.
Firstly find out what you could rent your unit out for.
Then you can either work out the outgoings ( council rates, water, house insurance, landlords insurance and expected maintenance costs) or just use 20% of the rent as an estimate.Rental income – expenses – interest on mortgage – depreciation = loss on property
Depreciation is the tricky bit and depends on the age of the unit. Maybe someone else can help if you post the age of the unit. If it's over 40 years old I think you can pretty much discount the depreciation for the purpose of this exercise.
By deducting this loss from your other income you can work out how much tax you will save. Don't forget if you own the property 50/50 with your partner then each of you need to declare half the loss.
Compare this saving against what you would be paying in rent and you will see if it's worth your while.
Remember to consider non cash things like tenants never look after your property as well as you will and having to give up the emotional security of living in your own place.
You can rent out the unit for up to 6 years without effecting its CGT free status.Hope this helps
ElkaThank you both for your advice I am pretty sure our block is a 1960's original. Gives me two options to think about. I think its time to sit with an account and work out what will be best.
Thanks again
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