Hi All,
I joined here a while ago and got told to read steves book 0 – 130. It was a great read and i have a much better understanding of this whole property thing.
Upon reading the forums here it seems there are alot of wise folk around online!
Heres my situation:
have just obtained my first full time job since completing uni.Its going great and im diong well but i’ve only been there 2 months. Im actually in a graduate program. Im earning 50 K PA gross i have a car loan of about 15K and 3k in credit card debt. Which i can now afford to pay off of course.
I am getting really anxious to buy a home and either move out or rent it out.
I was just looking at some nice apartments in carlton 2 bedroom etc for around 150k +. That figure to me doesn’t really seem to daunting at all to borrow . So i was thinking of buying one of those and renting it out to students who go to melb uni or wherever. The prob is then tho wont i get capital gains tax if i sell it in 3 -5 years? What if i live in the apartment for one year after renting it out for two years? will i still have to pay?The main reason im looking at hte CBD is because i work there and really am sick of travelling back and fourth so far out (i live in ringwood).
Another alternative is for me to buy a house in mitcham or ringwood close to wehre i live. Rent it out and then move into it i guess to not get slogged with capital gains tax if i sell it in 3-5 years depending on prices.
I guess i could buy one and just keep it and buy something closer to the CBD with the equity in the first house.
Sorry for writing so much. But hopefully my situation makes sense. Becuase ive been in my job such a short time i could get my folks to go gaurentor for me i guess. would that be an option?
Thank you for your time.
Kind regards,
Joel
I am not 100% sure about this, but I believe if you buy a property and rent it out immediately rather than move in yourself, then move in later on, you are liable for CGT as you have used it as an I.P and not a PPoR.
The CGT rate is: tax on 100% of the cap gain if you sell within 12 months, or 50% of the cap gain if you sell after 12 months.
However, if you move in straight away and make it your PPoR (Principle Place of Residence), you are not liable for cap gains tax unless you move out and then rent it out. You can rent out your PPoR for up to 6 years and be exempt from CGT. After 6 years of renting you become liable for CGT, but it is pro-rated on the years that you use it as an I.P (Investment Property).
Again, not sure, but if you move back in before the 6 years, stay there for a while (I’m not sure how long) then move out and re-rent again you defer the CGT again for another 6 years.
It may be better to move in for 6 months (or is it a year?) to satisfy the FHOG regulations, then move out and use it as a rental, thus making the property CGT exempt for up to 6 years of renting.
It is advisable to check this with the ATO and a good accountant.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
thanks Marc,
Would i be exempt from CGT if i moved in and rented a room out if it was a 2 bedroom? That way i am closer to the city and get rent… its win win!
you said:
“It may be better to move in for 6 months (or is it a year?) to satisfy the FHOG regulations, then move out and use it as a rental, thus making the property CGT exempt for up to 6 years of renting.”can any body confirm if its 6 months or 12 months to satisfy the FHOG (what does that stand for).
when we got our FHOG we were allowed to rent it out but had to move in within a year
when we got our FHOG we were allowed to rent it out but had to move in within a year
oh ok interesting. so u rented it for like 11 months for instnace and moved in before 12.
thanks!
FHOG = First Home Owners Grant. To be eligible for this you need to move into the property within the first 12 months. A lot of accountants recommend that you have at least one bill sent to the property to show you have lived there within the 12 months – see your accountant about this.
thanks for that – but what about capital gains tax? is it the same rules?
thanks
Mate…
If the strata is cheap…
It’s in a good building (not too big)
no pool, no spa, no sauna, comes with parking, in good area, easy to rent, close to schools, transport, etc, good infrastructure…
for that price… Do it..Treat it as your PPOR for atleast first six months to get the $7K FHOG and stamp duty exemption… then pour your money into it as if it were a bank account…
Starting small is always the best way to go….Just make an offer… If it’s in a good area at that price… you’ll be fine… the only way you can go wrong is if you don’t take your first step.
Cheers,
Anthony.hi everyone,
This seems like a good spot to put my first post.i am searching for my first IP at the moment. looking for that illusive +ve CF. [wacko]
at the moment i have the idea to look at borderline +ve, crunch the numbers and work out how little i would have to pay to make it +ve and offer up to that mark. i figure the worst that can happen is they could say no to my offer. one day someone may say yes. does this sound like a good idea or would i be better off trying the find a problem make a solution type of game. but just starting out i dont know if i would be able to think of good solutions.
Vic
Hi Joel
Have a look at the ATO site, http://www.ato.gov.au and download the CGT booklet. It has a heap of examples in there relevant to this.
Find what the rules are and then work around them.
If you move in and move out, you can still treat the place as your main residence for up to 6 years with a few conditions. After you move back in and out again, the 6 years starts again. There is no time limit listed in the legislation (look at s118-145 of the ITAA and surrounding sections). But there is a Tax Ruling on what constitutes a main residence, they look at time spent there, mail going there, address on electoral roll, drivers licence etc. This TR can be found under the legal search on the ATO site, or send me an email and I can send a copy (it is on my other computer).
If you were to rent out one room and live in the other, then you cannot claim this exemption. The CGT will apply on the part of the place rented. probably 50% of CGT if it is a 2 bedder.
Terryw
Discover Home Loans
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Hi Terry,
Thanks for that advice.
So i guess my decision ive got to make it if i should either
A. move in for 6 months get bills sent there and move out then rent it. or
B. move in permanatly and rent out a room and just pay the capital gains tax if its applicable at 50%.Thanks again for your help Terry.
Hi Joel,
Just be aware, that First Home Buyers are not stamp duty exempt in Victoria, as Contrarion suggested.
Good luck! It is an exciting time!
Kelly
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