Hi Everyone,
What a great forum and thank you for your help in advance. I have a query and I will try and keep it simple. I am planning to sell my home as I want a sea change
I estimate I will have about 100k of equity after the sale however I'm unsure of my options. I make a reasonable income and I discussed options with an accountant. He basically said reduce debt on PPOR which is sound advice and then went on to say buy and IP and negative gear.
I am considering buying off the plan on an apartment in a coastal area. I haven't done any serious due diligence yet as I'm only inquiring at this stage. My questions really relates to the pros and cons of buying such a property given I have a PPOR that I wish to sell. In particular the CGT/tax implications should I purchase it as an investment and then decide to live in it when construction is completed? I have no idea if that a good or bad idea?
I would really appreciate some help on my options as I would most likely want to live in this apartment for a couple of years. Can I buy the apartment as an IP and get some tax benefits during construction, even though I plan to sell my current PPOR in the next few months? I believe there is a 10% deposit and the construction wont be complete till the end of 2012 on this particular apartment.
I am hoping to use some of the 100k equity to diversify into other areas of investment rather than put the whole lot into this new apartment. I may only stay in the apartment for a couple of years (then rent it out?) and don't really mind paying interest only on the loan (probably have an offset account linked). I understand I wont have any tax benefits if its my PPOR.
The apartment is in Fremantle (WA) lots of facilities, infrastructure and beach about 300 metres away so It may have some capital growth hopefully even though its an apartment. I'm happy to discuss it with a professional if anyone has any recommendations
Hope I haven't waffled on to much..thanks again
Steve
G'day Steve.
Have you explored NOT selling your current PPOR and doing the figures on borrowing against your equity, holding on to your PPOR and get continued capital growth, then when you turn it into your IP you can start writing off your costs against your tax through variation and depreciation?
Unfortunately, my experience is too many people dive into selling a property before exploring their options to hold and using that equity to expand their IP portfolio.
Kind regards,Hi Anthony,
Thanks for the reply. Yes I am open to all possibilities. I mentioned this to the accountant I visited and he said moving out of my current PPOR and using it as an investment is "crazy" in his words. He mentioned I do this then my current residence will attract CGT. To be frank the accountant wasn't terribly helpful and a little painful on the hip pocket.
The main reason I was considering selling is capital growth isn't great in the particular suburb I live in. Perhaps I need to seek further assistance.
Anyone's thoughts would be appreciated
Regards
SteveHi again Steve.
The best advice I can give you, based on what you have said in this forum, is to not talk to your Accountant about your investment aspirations. Accountants are mostly glorified number crunchers and most are not qualified to give comprehensive levels of investment advice and maintain a fiduciary duty of care to the clients. Case in point, an existing client of mine lives in Bunbury WA. In 2000 his Accountant 'advised' him to sell as he was getting virtually no deductions. My client owned this IP freehold and it was worth around $63000. He followed his Accountant's advice and sold in 2002 for $153,000 and was delighted. The couple who bought it sold it in 2003 for around $246,000. This same property today is worth $680,000! You see Steve, the Accountant could only see the tax implications and was not qualified to give investment advice – he couldn't factor in the resource boom that was hitting WA and therefore didn't consider current and future growth.
Please, talk to someone who knows and understands investing in property and will factor in all the necessary contingencies so YOU can make a decision based upon ALL the facts and how they relate to you.
I hope this has been of benefit to you.
Kind regards,ALF1 wrote:G'day Steve.Have you explored NOT selling your current PPOR and doing the figures on borrowing against your equity, holding on to your PPOR and get continued capital growth, then when you turn it into your IP you can start writing off your costs against your tax through variation and depreciation?
Unfortunately, my experience is too many people dive into selling a property before exploring their options to hold and using that equity to expand their IP portfolio.
Kind regards,It’s a good point that a lot of people don’t consider. By tapping into equity – and using it as a deposit and purchasing costs on an IP, you’re able to keep your PPOR and purchase an IP (providing you can service the debt) – you can have your cake and eat it too!
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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