What are the advantage of doing so if for example I rent out my PPR for $300/wk while also paying out rental of $300/wk myself? Is this really worth all that trouble to shift house?
It depends on how much tax you can save.
If you add up all the interest and depreciation etc and then work out what the loss will be, you then can work out how much tax you would be saving. These days with low interest rates it will be a lot less viable, but if your loan is still high then you may have a large loss and large tax savings.
You then need to work out if all the hassle of moving and then having someone else live in your 'home' is worth this saving.
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
Remember that rent paid by you is out of your after-tax income (ie take-home pay) and rent recieved is from pre-tax income so although you may be paying/recieving the same amounts they are not the same.
Currently, we are with CBA's colonial's Rate saver home loan thr' broker (Aug08 @ 8.85%, Bal $205k, Redraw a/c: $12K). My partner is earning abt $40K/yr gross. IF we were to rent out our current PPOR & go renting while looking for IP. Is this worth it to do so in our current situation?
We are sourcing new broker to help us get a better rate Or maybe refinance to get a better deal & also extra loan to buy some IP.
We have abt $100K extra for investment. The plan is to use it as a 20%deposits to buy 2IP. BUT will any bank lend the rest amount? We also need a investment accountant to help us setup the right structure going forward. Any advice will be appreciated.If is you what would you do to maximize return as a clever investor?
Hi Ice
Sounds to me like a total mess your Broker has got you into.
Remember if you rent your current PPOR then you are only able to claim the interest on the balance and not the amount post redraw or refinance. The interest paid will only be deductible at the highest marginal rate that you pay tax according to the way in which the property is currently held i.e Joint Tenants etc.
Sounds to me like you would be better of getting a Broker to crunch the number correctly for you and weighing up your options as what seems like a good idea to rent out your PPOR initially may not be such down the track. Why not use the equity in the property and go an invest in additional IP's.
Richard Taylor | Australia's leading private lender
The advantages of converting your PPR to an IP and renting can be substantial – tax savings (don't forget depreciation may be claimable on the construction cost of the house – depending on the age of the house) and you may be entitled to some rent assistance (if you have children) – in some cases this can be approximately $60 per week.
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