I was wondering what everyone thought of renting to increase cashflow in order to invest? This is the idea I came up with last night and I think it could possibly work.
My current PPOR mortgage repayments are $440 per week, and I would like to buy an investment property (with view to live in within 2 years) for $400k. My dilema is that I can only afford repayments on a property worth $300k.
What if I rented a small place for $180 per week and rented out my PPOR at $300? Then I could buy the $400k property & rent it out for $350. (Based on a conservate 4.5%)
Then my cashflow would increase by $570 and I could easily afford the repayments (300+350 = 750-180 rent). This seems too easy so I know there must be a drawback. What do you guys think??
Lena
Hi Lena,
In my opinion this is a very good option. You can also claim expenses and depreciciation once you change your PPOR into an IP.This will give you a further boost of income at tax return time.
The only challenge I think you will find is the lifestyle one. Although on paper it does not really matter if you rent or own, emotionally it does. In your PPOR you can paint a wall or hang a painting and you can live how you chose (make reno, etc). In a rental you cannot and you risk eviction at the term of the lease (although unlikely).
Good luck
MatWhy does your IP purchase need to be $400K, (unless you have already found this good deal)? What about buying one for a little less but just as good a deal on paper ie: yield and growth potential?????etc….Then you can have your cake and eat it too…
P.S I know I am in the sam situation.. Do I rent or buy…. Personally we will be buying and then doing it up over 12 months and then renting it out whilst we move to the next one…[inlove]….Snowflake
thanks guys [wink]
good point matthew about the tax bonus, i din’t even take that into consideration [upsidedown]
snowflake, we want to pay $400k because we want it to be a residence for us in 2 years time, we cannot afford it now. so it doesn’t have to have a good yield.
the other option that i was considering is buying a cheapie for say $150k and paying interest only. Then, after the year is up we own the property, and we’d only pay $20 a week more. the challenge now is finding such a cheap property in brisbane…
Hi alotti,
With what you said in your last post, you need to keep records of when the property was a PPOR and when it was an IP. You need to determine its value at the point you change from one to the other.The govt is not very kind, if you claim expenses and depreciaton when its an IP, they will also expect you to pay GCT on the capital growth during the time it was an IP as well! (when you sell up – if you ever do)
What’s that saying you cant have you cake and eat it too?
Mat
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