Hi all,
I am new to the whole property market with about 55K in a combo of cash and stocks currently. I am moving to Brisbane next year to start uni. After reading API magazine for a year and Steve's books the dream is to buy a place in Brisbane where the house can be rented out to uni students and the bottom can be converted into a apartment where I can live. The aim hopefully is that if I buy well, renting out the top portion should cover most costs allowing me to live rent free. My goal is one house a year after that first purchase which should be attainable with my aggressive saving regime. If this is a bad idea and advice points me in another direction I'm happy to find a positive cash-flow property and rent elsewhere. So far I have only experienced stocks and I am sick of the market where as the property market seems to be perfect for buyers!
Can some people who are have had far more experience comment on what they think of this idea?
Does this create an accounting nightmare with deductions and principle place of residence capital gains exemptions at a later date?Cheers
Renting a house to uni students:
Pro:
1. High rental return ( room by room)Con:
1. Damage to the home is likely
2. Not a lot of agent will take this up, you will have to self-manage
3. Tenants issues – Theft, dirty, don’t get along, noise
4. Insurance won’t insure
5. Can not declare to the bank in term of serviceability/ affordability
6. There have been a decreases in the number of student migrating to Aus in the past 2 years – high currency exchange and change in citizen/resident laws ( demand still there, but rent gone from $200 per room to $150…)
7. Short term rental – high vacancy during x-mas.I guess it all depends on HOW many students we are talking about here??? if it’s only 1-2 boarding in a 3 bedroom house then won’t be too much of an issue and the insurance will happily take it up as well.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
If your aiming to rent to uni students then look at something like a Uni lodge. You can buy the property and it is managed by an onsite manager and each room it rented out to uni students. This resolves a lot of the common issues that Shape discussed. You may even be able to live in it because your in Uni yourself. There are generally great returns on these types of deals too.
Shape wrote:Con: 1. Damage to the home is likelyThis has been my experience. We recently rented out a property to a young couple. During the first inspection, it became apparent that there were quite a few 'students' living in the property. Within one month of signing the lease – the place was…..well, not in the condition it was rented out to them in.
One of the joys of self managing
Needless to say, there are no students occupying the property now.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]
Thanx guys for your views. To expand, I was thinking of a 3 bed house with the hope that downstairs was a granny flat style and that I could live there. I am about to start uni myself at 23 and aim to purchase the house mid 2012. So I had half a year at uni to find tenants who are not the stereotypical uni students. After your comments though I might lean more towards young professionals as tenants.
I was more interested in the implications of renting out the above house while living in a separate granny flat underneath. At Brisbane prices I might have enough for a cosmetic reno after purchase hopefully. This would get me a slightly better yield on the rented rooms of the house and allow me to do up the granny flat also. I am single and and granny flat would suit me to a T. The aim is to kill two birds with one stone. The drain of rent and at least most of the mortgage repayments. Is it disadvantageous tax wise? And are there many other hurdles I don't know about? I was hoping to hear from someone who may have done it.
Cheersbeau wrote:Is it disadvantageous tax wise? And are there many other hurdles I don't know about? I was hoping to hear from someone who may have done it.
CheersIt's a good question. If it were a single dwelling that was your PPOR and you rented out a room or two, I'd assume it would be considered a private arrangement – therefore you probably wouldn't declare rent but you wouldn't be able to declare expenses either.
If you were to treat a portion of the property as an IP – there is likely to be CGT issues to consider.
As always, a qualified accountant should be able to advise.
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]
Needless to say, there are no students occupying the property now.You must be logged in to reply to this topic. If you don't have an account, you can register here.
