All Topics / Help Needed! / Cost of making my IP my PPOR

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  • Profile photo of NEPASHNEPASH
    Member
    @nepash
    Join Date: 2008
    Post Count: 28

    Hi,

    I am getting a return of $14,800/annum rental yeild from my IP. i am in the $70-$75K income range.
    I want to move into my IP.  I do not own any other property. I am currently paying $200/week in Rent, and i have to move out of there soon. I would expect to pay at least between, $230-$260/week for a new rental property.

    I also expect my income to go down in the next 6-12 months as i am trying to develop a business and will be on LWOP soon.

    I would like some suggestions on whether moving into My IP would be a good idea esp when my income is going down.

    What are the costs and benefits. I'm aware that i would be losing on th extra money i'm getting in rent compared to what i am paying in rent, and also i am getting negative gearing, and depreciation.

    I would lose all these incentives if i moved there. I would like to make a proper decision.

    Also my IP is about 12 KM further from the city than where i live now.

    Best Regards

    Nepash

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    What is the insurance, council rates, Water rates for the IP cost you as you would be paying for these expenses . I will guess a figure of $3000.
    Lost Rent = 14800
    Expenses = 3000
    Total = 17,800
    Cost per week = $342
    If you purchased the property after 2000 and rented it out you may be elligible for First home owners grant you need to look into this.
    If you move in you need to get investment property valued by a valuer as you are changing the capital asset status from investment to PPOR and this is a CGT event. This makes it easier to work out Capital gains tax in the future for the time it was an investment.
    As PPOR is exempt from CGT
    So
    Purchased –
    Cost base = Purchased Price
    Change of status
    Capital Gain = Value valuer noted it as – Cost base = Capital Gain
    Future sale proceeds – Value Valuer noted it at = Exempt capital gain
     

    Profile photo of NEPASHNEPASH
    Member
    @nepash
    Join Date: 2008
    Post Count: 28

    Council Rates $1,250 P.A

    Insurance incl, Landlord $480 P.A

    I bought the Property in Oct 2008. Its been rented ever since, i did not claim the FHOG. I would only be living there for a short while, i would not live there permanently, as it has development potential.

    How much in $$$ Terms would i be worse off, if i was to move out.

    Profile photo of NEPASHNEPASH
    Member
    @nepash
    Join Date: 2008
    Post Count: 28

    Please give some advice.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Thought Duckster had already given a good explanation of this.

    Not enough real data to provide an accurate assessment.

    Richard Taylor | Australia's leading private lender

    Profile photo of NEPASHNEPASH
    Member
    @nepash
    Join Date: 2008
    Post Count: 28

    Thanks Richard,

    Can you please let me what other information i could provide for you to make a better assessment.

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    As it is further away from the city, will you need to commute daily?

    On one side of the equation is the loss of rent and claimability of interest and expenses/depreciation (so there is the offset of negative gearing) on the other side you will have to pay all expenses & interest from your net income however you may be able to claim the FHBG as noted above.

    If you continue to rent elsewhere you will still be getting your neg gearing/depr & some income however you will be paying rent. As you may be in a lower tax bracket it may not be worthwhile  so you will need to do all of the numbers yourself to satisfy you of the decision – you will need to consider the net aftertax scenario ie before (living in rented premises on current income) and after living in either rented or your own property taking into consideration your higher living expenses.

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