Hi,
Just new to this but wondering if anyone may be able to help.
My wife and I currently have 2 units in Perth that we feel have both peaked capital wise. We are wanting to buy a property as soon as we possibly can in the eastern states (most likely QSLD)
Right now our income is low, but hoping for a significant increase with a new job prospect in the next 3 months.
We are wondering what the max is we could borrow right now on the income that we have, and if we are best to sell both places (happy to do) or to use equity. (given Capital gains tax etc)
Here’s the situation.
IP – Current Market Value: $239000
Mortgage: $130000
Current Rent: $165 (could easily be $200 – once lease runs out in May)Second Property (current residence)
Market Value: $255000
Mortgage: $185000Current Gross Income: $43000
We are wanting to buy a house for approx $300 000.
Any advice would be gratefully received.
Thanks very much
Ben.
ps. Should be said that we are not so keen to hold onto either Perth property. We are also wanting to move to QSLD to live in the house that we buy.
Hi ben/jodie, and welcome to the forum. In all fairness, from reading your post you sound like you have almost answered your own question! [biggrin] Many will advocate never selling your property, which is great if you can do that, but in all fairness you will not actually enjoy the real gains until the money is in the bank, or you choose to refinance the properties to access it that way – which again can cause problems if you are unable to service the loan. The money you make selling your own home will be yours ‘tax free’ if you have never used it as an investment property, and if you feel the market has ‘peaked’ you are in a great position to sell one, or both, and ‘follow your dream’, and own half of your new home ….almost….. If you do not need the funds immediately keeping your one IP may be a good idea, but obviously it depends on your long term goals and financial position. Using your own place of residence to make a profit at resale time is one of the few things in Australia we are ‘allowed’ to do to build wealth without getting taxed to the eyeballs, so you are in a good position guys. Whatever you choose to do, all the best with the move eh? [strum]
Hi Ben and Jodie, Where are your units in Perth? Where in Qld are you moving to? I’m from Bris, moved to Perth 8 yrs ago.
Hi Ben
Firstly welcome to the forum.
Don’t put yourself down too much you have some good equity in a couple of properties and you income isnt bad at all.
With the equity you have i cannot see too much of a problem in purchasing a home in Qld (And i must admit i dont blame you for wanting to buy in the Sunshine State) for around $300,000.
On disadvantage is of course that if you intend to move over to Qld and the property will be your PPOR then the interest will not be Tax deductible.
There are a couple of ways of getting round this but comes at some cost and would need more information to see whether it would warrant doing so.
With regards to the CGT you would be liable for would need to know:
1) What the original purchase price and approx date of each purchase Contract for each property.
2) How the properties are held i.e Joint Tenants between you and your wife ?To make further recommendations on your structure I would need to know whether the loans are interest only or P & I and whether the loans are Cross collateralised.
Here to help.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
hi Ben,
You wrote:
“IP – Current Market Value: $239000
Mortgage: $130000
Current Rent: $165 (could easily be $200 – once lease runs out in May)Second Property (current residence)
Market Value: $255000
Mortgage: $185000″As a rule of thumb, it generally pays to pay of your PPOR first for tax reasons.
therefore, you would transfer the equity from your IP to your PPOR, and transfer the loan from your PPOR to your IP, that way ALL of the interest and loan costs are tax deductible.Ofcourse, if you’re planning to move pretty soon to QLD…
then, jack the rent up for both of them when you can and make the move… You shouldn’t have do many dramas trying to get another loan… just make sure you are comfortable with repayments etc if you’re not in a cash flow +ve position.cheers,
Originally posted by The Contrarian:As a rule of thumb, it generally pays to pay of your PPOR first for tax reasons.
therefore, you would transfer the equity from your IP to your PPOR, and transfer the loan from your PPOR to your IP, that way ALL of the interest and loan costs are tax deductible.Hello Contrarian
This would be a nice trick if it worked so can you please explain how to make it work.
To the best of my knowledge taking equity out of your IP to pay down your PPOR mortguage would not make the interest on that amount tax deductible. The ATO is interested in what you did with the money (used for private purposes not investment in this case) and not where it came from.
So what am I missing?
ElkaP.S. Almost didn’t recognise you Richard. [biggrin]
Have you changed your hare?Refinance?
“There is nothing scarier than ignorance in action”
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