This post is in regards to receive any advice on placing my PPOR on rent. We bought our First Home approx 2 years back. Now we are planning to put it on rent. Would like any advice on what things need to be considered before putting it on rent as this is first time we are putting it on rent. Would appreciate any information on what expenses can be considered as tax deductible whether it is while trying to do things before placing it on rent (cleaning, lawn maintenance, lock changes etc) or while it has been rented. Anything other things to be considered would be greatly appreciated. Thanks once again in advance for all your help.
Hsingh10,
I would get a QS report asap to work out how much depreciation you may claim each financial year. Then I would look at getting landlord insurance to insurance against loss of rent and/or tenant damage.
I recommend you structure your loan repayments to be Interest only. There's no point paying off principal on an investment loan. If you really have to park your excess cash anywhere, I would setup an offset account linked to your investment loan so to preserve the principal on your investment loan.
Kevin,
What is your suggestion if the PPOR has been paid off prior to renting out??
Hello hsingh10
This may be a useful place to start reading about deductible expenses for an IP. It's the ATO site.
http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/002/010/005
Hope this helps
ElkaThanks Kevin and Elka. I really appreciate your response.
One more thing, if I decide to sell the house after 2-3 years, will there be any CGT on it at all? Thanks in advance
There will be some CGT payable on the house, for the portion it was used as an investment property. Before you rent it out, you should get a valuation.
Using the 6 year rule you are allowed to rent out your PPOR for up to 6 years without affecting it's CGT free status.
So, if you sell after renting it out for 2/3 years and have no other property that you want to treat as your PPOR you should have no CGT to pay.
Cheers
ElkaFantastic. Thanks Elka for confirming this for me. I read somewhere that if you initially settled the property as PPOR and moved in it & then rented it for less than 6 years than CGT is waived off. Brilliant !!
god_of_money wrote:Kevin,What is your suggestion if the PPOR has been paid off prior to renting out??
GOM,
In Hsingh's case, it is probably not a realistic situation for him/her to have their loan fully paid off as he was a FHB only 2 years ago. Not many ppl can pay off the loan of their 1st home in 2 years!
But if we continue with your hypothetical situation, and the PPOR loan is paid off prior to renting out, then that person should be congratulated on owning an IP unencumbered (i.e no more loan to service). He/she would be in an enviable position to consider their refinancing options using their equity to suit their circumstances and/or risk profile.
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