Forum Replies Created
- jacpru wrote:it doesnt make sense to me borrowing to cover debt
It makes sense when it means you can keep an asset(s) that will grow in the medium/long term at a much higher rate than the cost to maintain. Also means you never have to pay CGT!
The risk is starting it too early at a point where you need property to be going up by 10% every year for it to work.
If you have a 5-7 year buffer with a diverse property portfolio the risk is minimal.
Hi Microchip,
Your stratergy for the $30K will cause you disadvantage.Reason – Whilst they are both IP's your interest deductions will basically be the same. You're just shifting $30K from one loan to another, one goes up $30K one goes down $30K. Except you are going to pay refinance costs (your disadvantage).
When you move into IP 1 it ceases to be an income producing Asset so the interest on its original loan is non deductible and the interest on the $30K also becomes non deductible.
Dont be confused by the common misunderstanding that borrowing against an investment property means its automatically deductible. It is what the loan goes towards that determines if you can claim or not.
Phil
Hi Hoopers,
Can I still claim the IP as my PPOR for the last 6 years and only pay CGT on the remaining 4 years that the property was an IP while I was living in a property with my brother that i owned 50/50?
No. You would have needed to move back in for a period of 3-6 months once your brother bought you out to re-establish the property as your PPOR. You could have then moved out with your girlfriend and maintained it as your PPOR.
Another question I have if the above scenario can't work is the property is currently tennanted and is in poor condition and valued at approx $260-270,000, Can I have this property valued when I get rid on the tennants, claim it as my PPOR from when they move out as I currently only have this property in my name only ( the house i am living in is in my wifes name only) then clean, paint and renovate the property to increase its value to hopefully sell for around $300-320,000 and avoid paying extra CGT for the extra gain of $30-40,000?
The cost base of the property is the market value at the time you started to rent it out… which based on your info would be around 1999. So if you were to sell the property your Gross Capital Gain would roughly be the price you sell it for, less the market value in 1999… then you need to work out… from 1999 until the date you sell it, what was the % of time it was your PPOR since 1999. You then get that % CGT free.
For example if you live in it for the next ten years it would have roughly been an IP for 10 years and a PPOR for 10 years so 50% .
Phil
