Hi All,
I have moved out of my PROP, which I bought for 220 k and currently have 1 k owing, so I can access 170K of so right away with re-draw.. today the prop is worth 250-260k.
if i wanted to convert it to IP,
1) should I first just take my excess 170k out using redraw to say High Interest Saving account
2) get a current valuation of the home that its worth 250k or so…
and then put it on rent..im planning to rent out for next 1-2 years, so I should be able to use the 170K to buy other IP right???
also when I eventually sell this first IP. i would have to pay CGT on selling price say 300k – todays market value (260K) right?
am I on right track and any other handy advice?
Thanks
InvestHut
oh yeah, Im also on 95k a year income, so def pay lots of tax.. and the prop will rent for 320-340 per week.
being close to station, shops and 3 schools
thanks,
InvestHut
investhut wrote:I have moved out of my PROP, which I bought for 220 k and currently have 1 k owing, so I can access 170K of so right away with re-draw.. today the prop is worth 250-260k.Hi Investhut
That means you only have a $1k loan to claim deductions from.
Unless this asset is transferred to another entity/spouse – this isn't an ideal situation for an IP.
Unfortunately you can't simply boost the debt and claim the interest if the money isn't being used for investment purposes.
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]
jamie so if I take the money out and put it as 20% deposit for 1 or 2 IP, then it has the same effect right?
Thanks
Investhut
Hi Investhut,
The ATO will only allow a deduction if the money is for investment purposes.
As Jamie has said if you took some of the money and used it as deposit money for an investment property then the sum of money becomes deductible.
Now I am not a broker or an accountant but there would be paper trail and security advantages to setting yourself up with a line of credit and use these funds for your deposit. In other words keep the monies separate.
1. Using the numbers you have given above – if the property is valued at $250K you have potential additional borrowings of $200K (80% of property value) less the $1K you already owe. This will give you a line of credit of up to $199K for depoiits etc.
2. You can borrow additional funds and have these secured by another investment property.Now all of this is subject to your capacity to service additional loans. On you income your servcieability will be pretty good.
Your CGT liability will be based on the difference between the value of the property on the day you move out and your eventual sellign price. Any gains made while you were living in the house will be CVGT free. If you do not buy another home the CGT free period can extend for a further 6 years beyond your departure date.
Part of your 'deductibility' problem here has been created by your desire to pay off the loan and then move out. If there is a possibility you will move out of your PPOR you are better off using an offset, rather than redraw, structure so you can use the funds as you want without compromising your deductibility status.
investhut wrote:jamie so if I take the money out and put it as 20% deposit for 1 or 2 IP, then it has the same effect right?Thanks
Investhut
Hi again
Yep, if you top-up the loan and use those funds for "investment" purposes than the funds will be deductible.
If you top-up the loan and use the funds towards a PPOR than say goodbye to deductibility on those funds.
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]
thaks Derek and Jamie,
honestly the situation has changed way beyond my control in last 2 months. i had our first Baby and my mother passed way 1 week after that. so for family reasons I will be renting closer to my Sister home for 1-2 years..
all i know is have 175K redraw, prop will rent for 340 per week. I am happy to take the money from the house and reinvest in IP. but that will take 1-2 months to find the next right IP.
but can I rent the Prop say from 15 Oct, find the right IP sometime in Nov and then use my redraw to show 20%, stamp duty and other cost for the IP..
sorry my Accountant is currently overseas, other wise would have quizzed him as well.
Thanks,
Manish
Hi Manish
Sorry to hear about your sad news.
With the loan – just think of it in this simple way.
What are funds being used for?
If it's for investment purposes = funds are tax deductible
If it's for non-investment purposes = funds are non-tax deductibleI'm not an accountant (and would advise that you seek qualified advice) but if you are using these funds for an investment property then I would have thought they would be tax deductible.
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]
Derik and Jamie M and Terry M have been such a huge help and inpiration to me as they have exllained quite a lot and make thing clearer. I didn’t know much before but thanks to these three they have given
Me such confidence and heading forward.They know what they’re talking about.
Sonny nguyen
I will second that, thanks to all for sharing their knowledge and wisdom. Not only me, but 100's other benefit from this forum.
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