Hi all
Was wondering if someone could help me with this query..
I am wanting to purchase a property as an investment, however, I wish to live in it and rent out the other room.
So would this be considered as an investment property or a residential property.
Your comments and feedback is appreciated.
Cheers
sbrodyPS: Yes, I am a “newbie” and this is my first post ! [biggrin]
Hi Sbrody,
In terms of your loan, when you apply for a loan if you declare the property to be an IP then you can use some of the rent for servicability, but if you can not claim the First Home Owners Grant (assuming you are eligible for it).
There are also tax implications. If you rent out a room you can claim some of the Interest on your loan on tax and probably some depreciation. However, if you do this you lose some of your Capital Gains Tax exemption.
This is a very simplistic explanation. You should get yourself a good accountant and discuss the various tax implications with them, but I hope this is of some assistance.
Regards
Alistair PerryAlistair is right as always. But there are a few little strategies one can employ to get the best of both worlds.
If the property is tenanted then you can allow that tenancy to finish. The bank will take the rent into account. But if you then change your mind and move in within the first 12 months then it is now a home and you can apply for the FHOG directly. You need to remain there for at least 6 months. The bank has no interest in your moving in post settlement.
If you have a “friend” stay with you and chip in some money for electricity and water then this isn’t considered renting. You will not have to apportion CG and pay tax on a proportion of it. However a lender will not accept this for serviceability purposes. Either the whole place is leased or it isn’t although I have had some lenders waive this requirement but cannot guarantee it in the future
As Alistair suggests you should speak to an accountant. These are just general ideas and certainly not advice for you.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Alistair and Simon
Thank you for your guidence. You have been a great help.
Cheers
Simon Brody
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