Hi,
I own an inner city apartment which I owe $290,000 which is worth approx $650,000. I therefore have $360,000 in equity.
I plan to move out of this apartment in 12 months and buy a new house of considerable value, say around $1,400,000 as my income is going to pick up significantly and reliably.
I know my new place will be my PPOR and therefore a nontaxdeductable debt. What i was wanting an opinion on is:
1. Am I better off selling the current property, taking the $360,000 profit to use as a deposit for the new house and maybe also use some of the profit as a deposit to buy another investment property. That way, I will be decreasing my nondeductable debt on the new house and still having a deductable debt in a new investment property.
2. Or, should I use the equity to as deposit for the new house and retain the current property, thereby have a larger nondeductable debt but retain the current property as an investment property and retain some equity in it?
I am unsure of what will be the best decision and how the maths all works out?
Thankyou,
SW
I just wrote out a long reply to a similar post here:
https://www.propertyinvesting.com/forums/getting-technical/finance/4330095?#comment-199355It may apply to you too, or some of it.
Selling and buying again costs a fortune.
Since you are going to be having such a large loan on the new one you may want to consider doing something like moving in and then out again and renting it and using the 6 year CGT exemption rule to avoid CGT but allowing you to claim all depreciation, expenses etc and thereby saving you a fortune in tax. Setting it up properly and thinking outside the square may enable you to have your cake and eat it too.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry. As you say, some of of your last post was relevant and made good sense.
It is a good thought of moving in and out and avoiding CBT, i didn't entertain that idea at all. My only worry would be the ability to rent a property worth such an amount in this climate. I wouldn't want to buy an expensive property, move in and out and then be stuck covering the mortgage repayments and another loan/rent repayments.
My question was mainly related to tax effectiveness when my income picks up. Maybe I would be better selling, decreasing the mortgage on the new ppor, having a 100% offset account and IO loan and buying another IP to offset tax when i get enough equity?
SW
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