I’m thinking of buying an apartment close to the University for my children to stay while studying there. Is that considered as an IP for which CGT will be applied when we want to sell later? if so can we claim tax on bank interest, depreciations etc.. I’ve also heard of “holiday house” but don’t understand how to go about it. Can anyone please explain or direct me to some related websites to read. I bought my 1st IP 2 years ago without any knowledge about investment. I made quite a few expensive mistakes.
Thanks heaps in advance for your advice.
Huey
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]Legally you should rent out your IP at market rent (ie arms length) to qualify for normal deductions. Otherwise everyman will rent it out to his buddy for $10 pw & claim $300 pw interest. If somehow your children can ‘pay’ market rent to you – then I can’t see why it is not normal IP.
Re holiday house – again legally you only claim the period that you rent out the prop. If you use the holiday house to ‘live in’ say 3 mths – then no deductions will apply for that 3 mths.
Even you make mistakes 2 yrs ago – the prop value now should gone up 40-50% isn’t it ? Care to share your mistakes for us to learn?Cheers.
Thanks CY,
From what you explain, I understand that :
(1) both types are subject to CGT
(2) for the periods that our family live in these houses we can’t claim depreciations unless we rent them out to other people, if to ourself it has to be at the market price.There is nothing worth from my mistakes for you to learn! Over 2 years ago I decided to buy an IP & planned to pay it off by the time I retired so the income from the IP would supplement my super pension. I had a look at properties for sale at 5 potential areas in the city or 3, 4 km from the city . At the end I chose a privately owned apartment in the mixed privately owned/serviced apartment complex in the city. Reasons : I didn’t know that I could claim heaps from depreciations. I was unlucky I met a new real estate agent who didn’t know much about depreciations or other aspects of investment to advise me either. I thought if I couldn’t get tenants I couldn’t affort to pay the bank but I could because I was in the high income group. I felt safe with an IP in the city because it’s easier to get tenants.
I’m still ahead with my IP. It’s positive gear but it’s capital gain is not much. Its market value is the same as what the previous owner paid for 6 years ago. There are so many new residential buildings in the city & will be more in the next few years. Finding tenants will be tougher.
All properties in areas that I considered at the same time have increased in price between 80 – 100%. They are either at walking distance to University, shopping center or not very far from the city.
Huey
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