SELL OR RENT ???

Hi Guys,

I split up with my girlfriend 6 months ago and we were in the process of building a new house together. The house was finished 2 months ago and my ex has been living in the new house. The house is in a new estate and over the next 12 months 2 golf courses will be completed, health club, pool, spa, etc. These facilities are in the process of being constructed. The house will be worth much more in 12 months after these facilities are completed.

Current Loan = $395,000
Current Value = $525,000
Estimated Equity = $104,000

We have 2 options :

1) Sell the house now for $525,000 and make about $55,000 cash each.

2) We could rent the property out for $400 per week. We could also draw down $104,000 of equity ($52,000 each) to invest in other areas. Our new loan would be $499,000 but our interest payments would now be tax deductible and we could claim other costs associated with keeping the property such as rates, insurance, etc.

After 12 months when the facilities are completed we could sell the house for approximately $600,000, pay out the loan and pocket an extra $40,000 each. Total profit would be $52,000 (equity) + $40,000 (profit on sale) = $92,000.

If we take Option 2 would we have to pay capital gains tax on sale ? (We would both be renting for the 12 months and would not be claiming another ppor during this time).

What would you do in my situation ? Option 1 or Option 2 ? Can you give me some positives and negatives for both options ?

Any advice would be greatly appreciated !

Cheers [biggrin]

Brad