hi there this will be my first property purchase. I dont want to miss out on the first home buyers grant plus i have no deposit. i have preapproval for finance for $200k and spent 3 months looking for a porperty.
There are 2 options 1: 3 bedroom unit only 3 years old fo $200k or a 3 bedroom house 20 years old at $180k. my understanding is the age o the unit works in my favour for depreciation purposes.I intend to rent the property initially then i have to move in there within 12months to satisfy the criteria for First Home Buyers.
My query is first off does anyone know whether i can still claim depriciation in the first 10-11 months while i am not living there?And is it better to go with the newer porpoerty or the older one with potential.. needs paint job and cleaning up? And are houses generally better for capital growth or it doesnt really matter?? If i go with the older house i'd want to build up equity as quickly as i can so i can make a 2nd purchase.
A lil guidance would be much appreciated.
Thanking you in Advance.
Hello Tylon,
The depreciation, if you are renting it out for the 10-11 months(thus it is income-producing) you can claim the depreciation for that portion of the year. With the FHOG, I advise you to do a google search for the FHOG website to check that you are eligible.
With the FHOG, you are saying that you will live in their in the first 12 months to get the FHOG, that is kinda true, you also need to satisfy that you have lived there for atleast 6 months out of the first 12 months to get the FHOG.
I am using the same approach and I will be moving in at the start(for 6 months) and doing a full renovation, then renting it out at the end of the 6 months, that will enable me to get the FHOG and I will also be able to grab more value for my property.
Also for depreciation. If construction must have commenced on or after July 18, 1985.
Where construction commenced between 18 July, 1985 and 15 September, 1987 depreciation is applied at 4% of construction costs and is claimable for 25 years.
Where construction commenced after 15 September, 1987 depreciation is applied at 2.5% of construction costs and is claimable for 40 years.
If the older house one of these cases then you can still claim a substantial amount.
Also what percentgae do you reckon of the purchase price that is land???.
I've read that house's its very high and in units the land % is like 5%.
-Land appreciates.
-Buildings depreciate.
SO with the unit are you primarily buying a building or some land.IN the time that you have to live there for 6 months you could do those renovations that you listed and also many more, so you can get your moneys worth out of those interest repayments. Also notes that during the 6 months of you living there it will be counted are your principle place of residence and thus you won't be able to claim the interest as a tax-deduction, until you move out and get tenants in.
Ah, the second last sentence, of your post.
Its true, you can add alot of value to a property and then get another separate(a split) loan against your property that will cover things like the 2nd IP deposit, closing costs, maybe even renovation costs for the 2nd IP.
There is so many things you can do with property investing, it can become overwhelming at times.
Kind Regards,
Christopher Fife.DraconisV wrote:Hello Tylon,
With the FHOG, you are saying that you will live in their in the first 12 months to get the FHOG, that is kinda true, you also need to satisfy that you have lived there for atleast 6 months out of the first 12 months to get the FHOG.
Almost right …
You need to live in the home for 6 months STARTING within the first 12 months. Subtle but significant difference.
I would prefer to see you move straight in – this gives you the full CGT exemption for 6 years rather than losing the first bit – which could be significant if youy make decent capital improvements when you renovate.
I would also reconsider the 20 year old house. Land is worth more than a structure and it will have more land than a unit. Also being 20 years old it will give you more scope for capital improvement than a near new unit will.
Cheers,
Thanks Simon and Christopher!! No really thank you this has given me more tpics to research. Im finding that there is moutain of information and it can be overwhelming to the point where it sometimes paralyses ppl into inaction.
Simon your point about CGT i did not even consider nor realise that WHEN i move in has such a huge impact. I had assumed that exepmtion would be there regardless. So i'll me making a tip the accountant before i do purchase. Thanks for that.
And i think you both are right… the older/cheaper house actually has depreciation and better capital growth potential which will allow me to move onto a 2nd purchase quicker.
Thanks for all your help.
Grateful!!
tylon020
What if he was to purchase the 20 year old house as that has the best potential for appreciation over time with land value increases and with the house improvements if its renivated improving its perceived worth, claims the first home owners grant and then rents out each spare room for X amount per week while he renevaites it a room at a time…
it would be considered his PPoR to get the FHoG so I guese he wont be able to claim interest as an I.P but at least he could receive some cash in hand income renting out the spare rooms whilst fixing the place up… I mean as long as he stays for the first 6 months in residence ( on paper) and adds value is'nt it possible to later approach his lender and seek to have it revalued and hopfully unlock some equity for his next Ip or reno project etc
would this be ok and worth considering ?what would be the pro's and con's ?
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