To rent or not to rent?

Viewing 3 posts - 1 through 3 (of 3 total)

Lawry73
Member
@lawry73
Join Date: 2003
Post Count: 123
April 5, 2004 - 4:41 am
Dear investors,
I have 1 investment unit (negatively geared) and living in my own unit.
I am thinking of renting out my unit (purchased more than 1 year ago) and start renting elsewhere cheaper.
If I rent out my present unit, it will be negatively geared too.
Is there a way to calculate if it will be better for me to rent than to live in my present unit, especially I can have 2 investment units.
OR has anyone had this experience and what’s your suggestion?
Also, the place that I am living in is around 11 years old (formerly an investment property of someone else) how do I know if I can still get depreciation benefits from this unit if I were to rent out?
Alternatively, what can I do if it is fully depreciated already?
Thanks.
Lawry73
melbear
Member
@melbear
Join Date: 2003
Post Count: 2,429
May 3, 2004 - 12:56 am
Lawry
If your unit is 11 years old, you will still have a goodly proportion of building to depreciate. Also, you will be able to depreciate carpets, curtains etc. etc. so it will definitely be worthwhile to get a QS report.
AS for what is better, to rent elsewhere or to stay in yours. You say your current home would be negatively geared if you rent it out. Which suggests that you are paying quite a bit in mortgage payments anyway?
If you can rent somewhere else for around the same price you will get in rent (or perhaps even a bit more), you will be in front as you have now turned the debt into deductible debt. You can also claim the depreciation, which is ‘wasted’ now.
Ultimately, it’s up to your comfort zone what you decide.
Cheers
Mel
woodsman
Member
@woodsman
Join Date: 2004
Post Count: 714
May 3, 2004 - 2:01 am
Lawry73,
Have done this myself. I rented out my 2 br apartment and now rent a 1 br around the corner. I made the in principle decision based on many reasons , but from a numbers point of view my 2br rents for $350 versus $225 for the 1br that I am renting. That doesn’t take into account, other costs which are claimable.
In order to figure out benefit in doing so, you will need
1. depreciation benefits schedule
2. other costs associated with property
3. rental and management fees
Determine net loss on the additional IP.
Go to
http://www.ato.gov.au/scripts/taxcalc/calc_standard_hire.asp. This allows you to calculate different tax payable for different salaries.Put in your adjusted salary based on the addition of the second IP and you will be able to determine tax benefit from the difference.
Obvioulsy, you will need to subtract your new rental that you will pay elsewhere.
James