Rural Property

Hi Billy,

My understanding is that you can only claim deductions on a property from the time it was advertised/available for rent. So if it is unrentable, it is possibly unable for deductions until the property is used for an income-producing purpose. I am unaware if there are different rules for rural properties, there are many knowledgable people on this forum here who could assist.

Also be aware that any repairs you do to the house to make it liveable are deemed as capital improvements and can not be deducted immediately, but rather they are depreciated at a percentage rate over several years, usually 2.5% over 40 years but can vary depending on the work done.

If it was purchased by a company there could possibly be some way of carrying a loss forward into subsequent income-producing years, but you’d need advice from an accountant on this.

LVR = loan to value ratio. Usually banks like it <80%, and generally for loans of more than 80 or 85% they will charge you Lenders Mortgage Insurance. So for an LVR of 80 you will need to come up with 20% of the purchase price, PLUS the closing costs (as a rough ballpark allow another 5%. may vary based on state stamp duty rates and other factors.

In terms of a deposit when making the offer, often $2000 or something similarly low is sufficient for exchange of contracts. But when the offer goes unconditional, or the settlement occurs, you will need the remainder of your chosen deposit. Whether its 20% you have saved, to avoid the mortgage insurance, or less is up to your personal financial situation and what the banks are willing to lend.

Cheers,
Emma

Hi,

Emma is right , it needs to be “rent able” ; it doesn’t need to produce income it just needs to have a sign agreement with a agent to be rented ( paper proof) . i had a IP i was renovating for 4 month and during that 4 month the accountant advise i would not be able to claim the interest deduction even though the purpose was for IP however it was not “on the market to be rented” + not livable at that stage.

Regarding LVR:

General rule of thumb is under 70% for rural with property.
If it’s vacant then it be 60%

1. If it’s larger then 5hec then minus another 10% LVR
2. Population less then 5,000 mins another 15% ( but your biggest hurdle here would be valuation and comparative sales….might be better off going commercial)

Of course everything is also done case by case; i had ANZ accept a rural vacant property that was 12 Hec at a 70% LVR no problem…so it also depends on the client and the overall deal.

Regards
Michael