The biggest negative in my mind is when the principal on the PPOR loan has been paid down to a low amount and the property then gets turned into an IP. At this point, there’s only a small loan to claim a deduction from – and if the person purchases another PPOR, they often have a large non deductible debt set up against it.
This can be avoided with the right finance structure in place from the start which is IO with an offset. Here’s some more info on the structure from an article I wrote for Australian Property Investor magazine.
Pros: Interest and expenses will be deductible and it will generate income
Cons: CGT will only be partially exempt if you decide to sell it in the future
Thank you all for your answers.
The idea behind my question is to be able t buy another PPOR now (I believe that it’s a buyer market at the moment around PERTH) and hold for a a couple of months or year my current PPOR in order to obtain to best selling price possible and generate positive cashflow in between.
Thank you for your comments
In that case both properties could be exempt if you sell the existing one within 6 months of acquiring the new one – seek tax advice as you need to plan.