Hi all,
I’m what you can call a newbie to Property Investment. I have just purchased my principle residence together with a friend and now we are looking at purchasing additional properties.
I would like to raise my income by renting out part of the house to students. This is so that we may service a larger loan for the next IP that we would like to buy before the end of the year.
My question is, are there any legalities / taxation issues to renting out part of your principle residence for income producing purposes? Also for how long will we need to rent the rooms out so that the banks will consider it regular income?
Thankyou in advance for any help!!
Sebastian
Yes, there are both legal & tax issues involved.
Legal issues include third party injuries & insurance-both claims & injuries.
Tax issues include losing portion of your CGT exempt status ie you’ll not be entitled to claim the full CGT exemption.
Thanks for the reply trueblue. With regards to the actual rental income derived from renting part of the house out, substaintating the income to the bank will just be a matter presenting the bank with a rental contract and receipts?
The bank would like a copy of the rental agreement. They also prefer the rent received to be directly debited into your bank account. However, I would think receipts should suffice.
what if they were to board as apposed to rent, would this change the situation?
Hi All
In my experience the banks have always been a bit sceptical about these arrangements. They normally want to see these arrangements in place for at least a year and that the rental income is shown on borrowers tax returns as evidence.
As you can see it’s a bit difficult to increase borrowing capacity using these arrangements in the short term.
Just my 2 cents.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
The topic ‘renting out principle home’ is closed to new replies.
