(Yes, 2 questions in a row!)
I have noticed that quite a few people seem to own IP’s but rent their PPOR. What are the pros and cons of building your property portfolio this way? Any feedback is most welcome.[
]Hi Daisii
We rent our PPOR because we move often and our rent is subsidised. But having said that we can afford to live in an expensive place for less than the loan repayments would be. We ahve friends who live in a $900,000 house but it only costs them $400/week to rent. They invest in property and all their interest payments are tax deductable someone else is helping to pay off the mortgage. Now if they wanted to live in a place where the properties are positively geared I would think it is better to own it yourself as the interest repayments would be less than the rent someone correct me if I am wrong. So I guess it comes down to where you live and if you can put up with renting. One good thing about renting is that when ever anything goes wrong you just ring the PM and they get it fixed, Our hot water system died the other day one quick call and 2 hours later a new hot water system, GreatErika
Hi all,
We rent and have no desire to buy a PPOR for a few years. The reason why is where we live is cheap to rent but VERY expensive to buy. The area is lovely, 30 minutes walk into Melbourne CBD, loads of trees and parks for our dog. But we are not going to pay 600k for a two bedroom miner’s cottage that needs 150k of renos to replace the stumps, rebuild the bathroom and remove the cracks in the walls.
Best regards
Marc
[email protected]Hi All
If you rent your PPOR you are missing out on a top tax free investment.
If you don’t want to purchase your PPOR, I would recommend you buy a property you want to rent out as an investment, live in it for a while, say 6 months, then rent it out and move into a rental property of your choice.
The effect of doing this is that your investment property will be not be subject to CGT for 6 years.
Cheers
Hi Taxman,
My understanding is that you can make any place you own your principal place of residence for 6 years whether or not you have ever lived in it. Not sure though how this would work if you were renting the place out. Can you still claim tax deductions for the interest you are paying on the loan if it is not later going to be subject to CGT?
LuckyoneHi Luckyone
The legislation regarding PPOR cleary states you must live in the house before renting it out. It doesn’t specify a time frame that you need to stay in it.
If you own more then one property, you can choose which one is your primary place of residence, however I suggest you would need to have lived in it first.
Once you have lived in it you can then treat it as a normal rental property, claiming all interest and other deductions.
If the property was not available for rent, no deductions are allowable. The interest, rates etc will then be used to reduce your capital gains.
Cheers
John
Good point taxman. I agree-you can have the best of both worlds.
Luckyone. I just posted about this in another question. There is a Tax Determination available at http://law.ato.gov.au/atolaw/view.htm?docid=TXD/TD959/NAT/ATO/00001 (TD 95/9).
It appears a you must live in the property first before you can claim it as your PPOR and then have up to 6 years where you can rent it out, and still claim it as your PPOR. I beleive you can still claim interest etc on the property even though you will not pay any CGT.Terryw
Discover Home Loans
North Sydney
[email protected]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
We are currently looking at selling our ppor, and know that due to it’s being in a top location, and being a ‘wow factor’ type house, that it won’t take long to go. Our only problem is that we have one poodle and 2 quiet cats – so finding a rental is proving difficult.
Don’t know if I’m allowed to ask on the forum, but if anyone has a top quality home with all the associated inclusions, that they would like to rent out in
Wollongar/Alstonville/Ballina and you would like excellent tenants…… email me at
[email protected]
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