Great stuff

So if I allocate a PPOR, but rent elsewhere and don’t actually live in it, can I then rent out the PPOR to a tenant, and still effectively use it as an investment property?

Cheers

Thanks for all your help.. again..

The ‘advice’ I got, was that as long as I lived in it for 6 months, it will be CGT exempt for 6 years… REGARDLESS of where I then go and live (as my PPOR or other).
What you are all suggesting though is, I can only claim CGT exemption whilst the property is my PPOR. I can only have one of these at a time…
In the situation above:
I buy a property on Jul 1st 2010
I move in July 2nd, 2010
I live in it for 6 months, then move out on Jan 3rd, 2011.
I sell the property on June 30th, 2016. I haven’t lived in it as a PPOR since Jan 2011.

Assuming I need a PPOR between 2011 and 2016 – (otherwise, where will I live?), I will have to pay CGT on the increase in value from the time I moved out and obtained a new PPOR, to the time I sold the property?

This clearly means if I have a portfolio of properties, the only CGT exemption I can claim is for the allocated PPORs during the period, of which there can only be one at a time. This makes sense, and seems fair and intuitive…. HOWEVER

I have been reading “Your Investment Property”, Feb 2010 issue. The Winner of the ‘Investor of the Year’ Award (Prue Muirhead), has some simple factors to share about her success. These are:
1. Buy as early as possible
2. borrow as much as possible
3. hold it forever
4. DON’T PAY CGT

Now I’m confused! How can you hold multiple properties… forever (even metaphorically)… and not pay CGT? When you have more than one property, and property prices rise, and you can only have one PPOR, you must be liable for CGT.. or have I missed the bleeding obvious here?

I’ll call the ATO today and see what happens, unless someone can shine some light on this?

Cheers everyone

Thanks again.

The 650K house has been a PPOR for 3 years now – but we need more space.. hence the consideration of moving out. I can’t swing a small baby in here… (my wife wouldn’t let me anyway)

I’ve always seen rent as “why pay off someone else’s mortgage”.. so never really thought about it as an option, There are a number of ‘old wife’s tales floating around which I need to be careful about. Now I’ve put some sums together however – i seem to be better off if I rent.

I’ve been reading about CGT, and seem to have 2 conflicting opinions:
1. After living in a property for 6 months – it becomes CGT exempt for 6 years
2. A property is CGT exempt only for the portion of time that you live in it as your PPOR.

Are these better off as new topics, or continuing the same one?

A hypothetical situation only… I was using it to work out a few things, if that is an important factor – what about if the house could be rented at $1000 per week.

Cheers

Steve

Wow – what I thought would promote a few short responses has provided an overwhelming amount of info. So firstly – a heartfelt thanks to all of you who have taken the time to put finger to key and provide feedback.

Key points that you have helped me with:
1. Stop ‘faffing about’ (English term for ‘analysis paralysis’) – get stuck in, it will only get harder and more expensive.
2. Renovation is out:
– I hate DIY – I spent 2 hours the other day trying to fit a door bolt. I was on the eighth and final screw when it snapped and left the shaft in the hole… I had to remove it and re-drill the whole thing, I was nearly crying. Anything more than a lick of paint and I might as well be throwing fifties down the toilet.
– My time is better spent working (and probably more profitable)
3. I’m going to look into depreciation on new properties, and the financial effect that will have on the situation. Hadn’t really considered that before
4. Work out what I need to live on in my retirement and work backwards from there. Somethings become pretty obvious only after someone mentions them….
5. I’m not going to blow my entire ‘spending capacity’ on a dream PPOR…. extremely tempting though this is.
6. Negative gearing is pretty attractive based on the high income. I did read somewhere however that negative gearing wasn’t that attractive (I think it was that Clitheroe chap), however I can’t seem to figure out why that is the case. Surely Negative Gearing allows me (in effect) to borrow at significantly lower rate based on the tax deductions against my primary income.? Ort am I barking up the wrong tree?
7. Land scares me a bit – no income yield for up to 2 years – just capital gain. If the market goes cactus again (albeit unlikely), an empty block is a less attractive proposition (I think). Throw on the fact that I have to supervise construction and incompetent trades people makes it even worse.

Once again, thanks for all your help, I really appreciate it, a hell of a lot cheaper than a financial advisor!

I do have another question, but will drop it onto a new topic.

Cheers