Just trying to get some ideas on what to do in order to be financially better off.
We live in a two bedroom house and are planning to subdivide off 5 blocks of approx 2 acres each (including the one our 2 bedroom is on). We Have a $50000 line of credit. We have to borrow to build a new house on our remaining 40 acres for us to live in. Any suggestions on which way to go.
1. Put the loan back on the 2 bedroom and make it a rental property, then build on the other 4 (to have as rentals) as we can afford them.
2. Sell the block with the two bedrooms (therefore have the benefits of not losing to CGT) which will pay off the new house and therefore give enough equity to borrow for the remaining investment houses.
Any comments/suggestions would be greatly appreciated.I am not an accountant and I think your question needs to be answered by an accountant however this is my understanding:-
If you borrow the funds on your existing 2 bedroom property to build the home you are going to live in (for personal use) then that particular part of the loan will not be tax deductible.
If you sell the 2 bedroom home you wont pay capital gains tax so that might be worth considering.
If you need to borrow funds to complete the subdivision the interest and costs associated will be tax deductible if you sell the subdived land.
Hope that makes sense but once again that is just my understanding and I am not an accountant by any means.
Anita Marshall
Advanced Finance Solutions
http://www.advancedfinance.com.au
[email protected]Hi Anita
Thanks for your reply. We are going to see an accountant in the next few weeks but have fairly well decided to sell the existing house to save on capital gains. That will pay off the new house and still get enough equity to start building on the subdivisions. I will also pose the question to others about what is tax deductible on subdivision.
Thanks again
Lesleigh
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