Converting PPOR to IP

Viewing 7 posts - 1 through 7 (of 7 total)

pete82
Participant
@pete82
Join Date: 2010
Post Count: 4
January 20, 2011 - 3:44 am
Hi All,
I have a unit in Sydney which I bought and have been living in for about 12 months. It is valued at $510,000 and has a loan of just under $400,000, $330,000 of which is IO and the rest is P&I.
I have been thinking about moving in with a friend (and pay them rent) and switching this property to IP. Are there any issues with doing this? I claimed the FHOG on this property when I bought it.
Currently it is costing me about $610/week for loan/strata/water payments. I think it would rent for $510, meaning it would cost me about $135 after the payments and the real estate agents commission. I would pay my friend $250/week rent so I guess I would be roughly $220 better off per week before tax and other utility savings are taken into account.
Am I missing anything?
Din
Member
@din
Join Date: 2010
Post Count: 7
January 20, 2011 - 4:05 am
you can claim tax deduction on interest payments and depreciation etc on the IP, so you are more better off than you think
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
January 20, 2011 - 7:15 am
Din's right – the beauty of negative gearing will reduce the amount you have to fork out of your own pocket. Make sure you grab a depreciation schedule and it might also be an idea to convert the entire loan to IO.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
January 20, 2011 - 12:19 pm
Also claim loan costs and travel – to and from property, accountant, post office (maybe).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
January 20, 2011 - 8:35 pm
Yep, good call. Start deducting those API and YIP mags as well – plus any IP books you might purchase.
I should have mentioned in the other post – if you want to get an idea of how much you can depreciate, you can get an estimate on this website – http://www.corpred.com.au/
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
Ana
Participant
@ana
Join Date: 2004
Post Count: 79
January 20, 2011 - 9:22 pm
I have to start by saying that I am not an accountant, however we had a similar question come up at our last seminar and the accountant specialist that I had on the panel of experts told the investor that:
If you move out of your primary place of residence (PPR), and don't purchase another PPR but instead go to rent, you can for all intents and purposes still recognise that property as your PPR even if you are receiving rent from it for up to 6 years. This means that if you go to sell it in that time frame, you will not have to pay capital gains tax.
Hope this helps.
DHCP
Member
@dhcp
Join Date: 2010
Post Count: 190
January 21, 2011 - 5:15 am
Because it is negatively geared IP, you minimise your tax payment, and if you bought well in well located area with good CG, its increased in equity help to fund another IP etc… as you see, such benefits available through property investment. This is the game of rich people and glad we have the opportunity to participate.