Hey Guys!
I have very little experience with PPOR s as i have never owned one.I have a family friend who needs help.I am still getting some of the finer details from my friends daughter(who is OS till 2 weeks time) who actually owns the house, but i I told him i am confident i would be able to find someone who could help with a re fi.
Here is the story.
My friends daughter bought a house for around $450k with $100 K of her own money.
Now the house is worth around $560K
She owes around $300 on it now
She is on a PPOR P/I loan currently.
The girl hasnt got a job currently as has been travelling the world for the past year or 2).
When she does work though she earns big money (as an actress )But here is the twist.
Her parents(our friends) went bankrupt about 10years ago so she
bought this house and the parents have been livng in it and paying the mortgage while she is OS.(they are now out of bankruptcy)
But, She is thinking about wanting to get out of the house some how when she gets back and buy elsewhere
So,her parents would like to try buy it from her but they are battling
with paying the Principle and interest payments now (i believe approx $2600 p/m)so are wondering if they can go to Interest only.
They dont have any other money or deposit either.I suggested the daughter possibly leave some money in the deal herself &/or doing a wrap deal for her parents .
The other issue is she has kept the property as her PPOR (as its her parents who are living there)and pays the rates etc out of her account so if she ever needed to sell she wouldnt need to pay CG tax.
i realise if it was an investment property it is easy to re fi to Interest only but what about PPOR s?
Can anyone think of any creative ideas as to how we could set this up to work?Thanks heaps guys !
We’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Yes, you can get an IO loan for a PPOR.
If they want to buy the property, they can do so without a deposit. It would be considered a favourable purchase as it is a transfer between family members.
Did you friend know she could have been claiming all interest and costs for this proeprty while not living in it, and still have it CGT when sold? Even if she has no income, the losses can be carried forward.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry,
you mentioned they can purchase without a deposit due it being a favourable purchase.So they can get a 100% lend from a bank or you mean if the daughter leaves some money in the deal to act as a deposit for them?
Sorry Also
did you mean to say she could be claiming all expenses as if it was a true rental property(due to her family living in it) and stil not be liable for CGT when she sells? (only if she sells to her fam?)Thanks for yr help here guys!
We’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hello World Changer
To answer the second part of your question.
Assuming your friend lived in the house first as her PPOR then she can rent it out for up to 6 years without having to pay CGT when she sells, irrespective to whom she sells. This is assuming she has claimed no other property as her PPOR during that time. Seeing as she has been OS I assume this would be the case.
Your friends family should have just been paying her rent. It’s not relevant that it is her family. She would then have to declare this as income on her Oz tax return but she gets to deduct all expenses including interest, repairs, depreciation, insurance, council and water rates etc.
Assuming it’s negetively geared (i.e. rent does not cover all expenses) this loss is then deducted against any other income she has in Australia or carried forward till she does have income to deduct this from. I’m not sure how long a loss can be carried forward but I’m sure someone on the forum does.
Hope this helps
ElkaI didn’t know about the 6 years thing with out CGT. thats a handy piece of information.
Joshua
Investor Finance
[email protected]in relation to the favourable purchase question….
some lenders will lend 100% of the purchase price + fees/charges if buyer under market value.
For example…had a friend who was living in a brother in laws property and had done bit of work on the house over the 2 years they’d lived there so they negotiated to purchase the property at $250,000 where the actual market value was $330,000. In this scenario the lender was willing to lender 100% of purchase price +fees/charges.
something to think about.
Joshua
Investor Finance
[email protected]Hello Joshua
I only learned about it since joining this forum some months ago.
What’s even better is that you get to start the 6 years again if you move back in for a while. Below is a link to the ATO site where this is all explained.
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm
Cheers [smiling]
ElkaI knew about the 6 year rule (my account told me it came in because that how long 2 terms are in politician land – didnt need to sell their PPOR). My question however is:
If you have PPOR, move, rent it out claim as PPOR up to 6 years, where are you allowed to live in that time? Is there a distance. ie interstate, different town? Can you live in one of your IP’s as a “tenant” and move your PPOR status from one investmant to another as you buy and sell, without actually having lived there? Sorry if that isnt very clear. I cant find an answer on the ATO website.
Cheers
TammyOh you guys are on fire!!
Thats awesome ,I have learnt heaps!
I will let the guys know that we can probably do something for them!thanks heaps
all the best
LukeWe’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hello Tammy
That’s interesting. I must say I had wondered how they came up with 6 years.
As far as where you can live after you move out of your PPOR, I haven’t seen anything on the ATO site which restricts you. The point is that you don’t designate any other property as your PPOR.
So, I guess you can move into another property you own but without checking with the ATO I would be very surprised if they let you rent it from yourself. This means that you would lose the ability to claim expenses for the period you live there. I would imagine the best thing to do would be to go into someone elses rental.
You could of cause buy yourself another house to live in but not designate it as your PPOR till you sold the first one. This would mean that any capital gains you made from the time you bought the 2nd house till you sold the first one and made the second your PPOR would incur CGT when you sold it one day. I guess whether you win or lose on that would depend on which house had the most CG in that period.
The most important things to remember are:-
1. You must live in it as your PPOR first for this rule to apply
2. You must not rent it out before you make it your PPOR otherwise other rules apply.
3. You must not declare any other place as your PPOR during that 6 year period.Go to the link I posted a couple of posts ago. It’s all explained quite simply with good examples. Also check with your accountant.
I hope I have not made any mistakes here but if so would someone correct me please.
Hope this helps [smiling]
Elka
You must be logged in to reply to this topic. If you don't have an account, you can register here.
