First Investment Dilemma
I am a 26 year old female with a secure government job, I earn $53,000. I have just purchased my first home in Western Sydney for $320,000, my mortgage repayments are about $890 per f/n. So far I have re-painted, polished the floorboards, installed a new kitchen, and new air-con in the lounge room and master bedroom, all up I have probably invested $20,000. I have lived in the home for 12 months, and I rent out 2 bedrooms for a total of $325 per week (Including bills).
My dilemma is this: I have worked hard to secure the house which I hope in the future to turn into an investment. It doesn’t feel like my own, and I am sick of living with other people. I am thinking of renting an apartment and, renting my whole house out instead of sharing. I believe I could get $320 – $350 p/w for the house, however this would match what I myself would pay in rent. At the moment I have very little disposable income with all of my money pouring into fixing up the house. My long term goal is to secure investment properties for a good future; but I am extremely unhappy with my current living arrangements
Q1: Is it financially viable for me to rent out my house, and me rent an apartment somewhere else?
Q2: Tax time is coming – do I declare the rent from my roommates for the purpose of claiming the tax incentives (Interest on loans etc) – I don’t know too much about this area – or do I just keep the cash in my hand?
Q3: What is the best way for me to move on and up from here?
My gut instinct says "Why throw $320 onto someone else's mortgage when I could be putting it on my own?" But I am so unhappy with the way things are, and feel I am fighting a losing battle.
Hi I am a new investor as well, but I think after doing a lot of research, I would say you will be better off renting your own house for tax purposes & then keeping the rent from house-mates to pay the mortgage is best situation but only catch is that U get hit by CGT.
Hi Wannabe,
Good on you for jumping in and buying. Good on you also for having the bright idea of renting out some rooms to help pay off your mortgage.
Please, please, please pay for very good accounting advice as to what to when tax time rolls around and going forward in changing your PPOR into an investment property.
As for the decision to rent out your house and rent some where else, do what you need to, to get ahead now, before you have other commitments like a family, partner, elderly parents or whatever happens that will affect the way you spend and save money.
I rent. If you do a search you will find previous threads on it. It is good and bad but it means that any money that I have that isn't for living is for investing. There are plenty of people on both sides of the fence and it is really hard sometimes to rent when you really want your own place. But it really depends on what you want and how bad you want it.
I want it pretty bad. So I am prepared to live in a rented house in a nice area, with a REALLY CRAPPY PM who never returns emails or phone calls. Thank you HOCKING STUART BALWYN!!! (hehe)
If you hate where you are living, what other people are doing when you live there, then move. Rent out each room, give it to a top notch property manager and get them to deal with any issues with squabbles and the likes and spend your time making money or getting ahead in your life.
Enjoy.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeActually there will be no CGT applied. You are allowed to retain a house that you have been living in as your primary place of residence for up to 6 years after you move out and CGT will not be applied when you sell.
Why would an apartment cost as much to rent as you are getting in rent for a 3 bed house?
Also if you are making a loss on the rent each week compared to your costs, you can assist your cashflow by getting regular payments from the tax office on the basis of this loss.
It will also allow you to claim depreciation on the property.
I own 3 investment properties in Melbourne and Gladstone while living in Sydney and this works great for me. I can live where I want to without paying crazy prices for it and get the benefits of rules that only apply to investments, not your PPOR.
As suggested, see a good accountant that can give you advice to assist you.
People talk about rent money being wasted money, but you need to realise that interest is also wasted money. At least as an investment property it becomes tax deductable.
Hi Wannabe
In regards to your situation, i did the share housing thing for about 10 years and by the end of it, was ready to do just about anything to get a place on my own, so i can understand where your at…
Living in Western Sydney, if you were willing to downscale your accommodation, you can rent a one bed granny flat for maybe $180 p/w.
In regards to renting out your current PPOR, i threw some very quick figures through the Somerset PIA software. (7% I/O loan, $53K Annual income, $340 p/w rent, standard NSW depreciation scales etc) and it estimated after tax deductions, you would be out of pocket $98 per week.
Agreed, you will need to find some extra bucks each week to pay both the rent and the mortgage short fall, but hey, its an option that would allow your to keep your house and to also taken some time out living on your own for a while…
Like DWolfe said, you do what you have to do to get to where you want to go.
## Disclaimer – this is general advice only and should not be used for financial decisions. PLEASE seek specific advice from a qualified financial planner / accountant as to what would be the best financial decision. ##
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