Hi everyone,
I am looking to buy my first home for investment at the end of this year and was going to use my first home buyers grant to top up my deposit. I was planning to live in it for a year and in that time complete minor reno’s then rent out. A friend of mine said “the first one is the hardest”….. is this true and am I going about this the right way? What is the best way to get started?
Some needed advice would be muchly appreciated,
-Bec[
]Newbie comin through!
I agree that the first one is the hardest. It is harder to qualify for the finance and it is harder because you don’t really know what you are doing.
But it sounds like you have planned well as this property may also be CGT free if you sell within 6 years.
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
Is it the best idea for me to move out? What is the next step do I move into the next one too and so on until I can build up enough equity to buy “my home” or is there an easier way to do this? I am not sure where to go after that?………..Maybe I should start reading 0-130/ (which I have but haven’t got around to starting yet)[?]
Newbie comin through!
Hi Bec,
Is it the best idea for me to move out? What is the next step do I move into the next one too and so on until I can build up enough equity to buy “my home” or is there an easier way to do this?
As Terry indicated by living in the property long enough to establish it as your home (principal place of residence) you will have the advantage of this property remaining CGT free for 6 years after you move out. This can be a big kick along for your investment journey. Bear in mind you can, largely, only have one PPOR at any one time.
As to whether or not is is the best thing for you to do – well that depends [
].One of the downsides of owning (or buying) your own home is that the interest payments are not deductible and as such constantly upgrading to a bigger home can hold you back unless you can meaningfully use the equity as you move along the journey.
But then you do have a place you can call ‘home’.
Derek
Hey guys,
Just making sure that I understand the bit about no CGT for 6 years.
1. Buy a place using FHOG.
2. Live there as PPOR for 1 year.
3. Rent out for 6 years (claiming deductions on interest payments, depreciation etc.)
4. Sell towards end of seventh year of ownership and bear no CGT liability???Is there a set period of time (eg: 1 year) that you have to have a place as your PPOR to avoid CGT liability for 6 years? Is there a sliding scale? (eg: Live in the place for 6 months and have 2 yrs CGT free / Live for 2 years and get 10 yrs CGT free?
Many thanks as always,
Steve.“Knowledge is Power”
I believe that I have to live in it for 1 year regardless if I want to move out because I am using my first home buyers grant for part of the deposit, that is a term of the grant. Is there a specified amount of time you need to live in a residence before its classified as PPOR?
I am definitely confused about CGT, I thought after a year it was CGT free anyway?
-Bec[?]P.S. Thanks for your information guys it is very helpful for a newbie like me keep it comin. [
]Newbie comin through!
For FHOG you have to reside for 6 months.
For CGT purposes, I don’t believe there is a set time, but you do have to prove that you lived there, and if you moved within a month or so, you need to have a reason for it. The CGT free term is 6 years, regardless of living there 30 years or 1 month before moving out.
Cheers
MelHi Blondie
I bought my first IP and I got the FHOG but only lived in the place for about 5 Months, just make sure you have bills going there and you change your license and electoral roll and you should be right.
A much easier way (if possible)
i) Stay at home with the oldies
ii) Buy investment property in a place which you would like to live in down the track
iii) IP will probably be neg geared- thus, you will lose a bit of cash, and get a proportion of it back at the end of the fin year
iv) living at home will reduce your expenses significantly.
v) Equity will build up in the IP, can always access it.
vi) Leave when you cant put up with the oldies anymore, or they kick your arse out the door.If only I knew about this a decade or two ago, but, no, unfortunately not!
Originally posted by wrappack:A much easier way (if possible)
i) Stay at home with the oldies
ii) Buy investment property in a place which you would like to live in down the track
iii) IP will probably be neg geared- thus, you will lose a bit of cash, and get a proportion of it back at the end of the fin year
iv) living at home will reduce your expenses significantly.
v) Equity will build up in the IP, can always access it.
vi) Leave when you cant put up with the oldies anymore, or they kick your arse out the door.If only I knew about this a decade or two ago, but, no, unfortunately not!
I totally agreed
Warm Regards
Chan Dollars
[The bridge between where you are right now & where you want to be tomorrow is knowledge]Is it the best idea for me to move out? What is the next step do I move into the next one too and so on until I can build up enough equity to buy “my home” or is there an easier way to do this? I am not sure where to go after that?…….You can also use the strategy of buying a property with some work to be done, (or a lot of work, depending how keen you are at renovating/redecorating) and/or lacking features like carport etc, then adding these.
Add as much value as you can when living there for that 6 or 12 months, then sell and start over again-in a slightly better value property- that is if you like re-decorating of course.
If keep following this strategy you’re supposed to end up living in a really nice property and/or a great area eventually, as you buy a better quality property or in a better location each time.
Mind you this is not my idea, read about it quite a long time ago, can’t remember the author’s name but the idea is good I think (well at least in theory, haven’t tried it out).
Doesn’t work for me, it’s a bit upsetting when you have children to renovate around them and move the whole time. But for singles/couples it could work I imagine.Originally posted by Celivia:Add as much value as you can when living there for that 6 or 12 months, then sell and start over again-in a slightly better value property- that is if you like re-decorating of course.
Yes while living there you should add as much as value to the property, but for me I would not want to sale it. I would then get a valuation done to the property, draw down the equity for the next purchase. Move to the new property and rent out the previous one. By doing this way you will accummulate your property portfolio much faster.
Kind regards
Chan Dollars
[Retire Young, Retire Rich]Yes while living there you should add as much as value to the property, but for me I would not want to sale it. I would then get a valuation done to the property, draw down the equity for the next purchase. Move to the new property and rent out the previous one. By doing this way you will accummulate your property portfolio much faster.Yes this seems like a great idea, Chan, and you avoid the costs of selling this way plus get to keep the property. I think I’d prefer that myself.
However it may also depend on the person’s serviceablity and whether the property would be negatively geared.
Probably depends on the area/location and personal circumstances which one would be the best strategy for each individual.Originally posted by Celivia:Yes while living there you should add as much as value to the property, but for me I would not want to sale it. I would then get a valuation done to the property, draw down the equity for the next purchase. Move to the new property and rent out the previous one. By doing this way you will accummulate your property portfolio much faster.Yes this seems like a great idea, Chan, and you avoid the costs of selling this way plus get to keep the property. I think I’d prefer that myself.
However it may also depend on the person’s serviceablity and whether the property would be negatively geared.
Probably depends on the area/location and personal circumstances which one would be the best strategy for each individual.Happily agreed because if the property is heavily negatively gear then it would be better to sale it otherwise keep it would be the best.
Kind regards
Chan Dollars
[Retire Young, Retire Rich]We seem to agree a lot Chan![
][^]THANK YOU EVERYONE!!!!!
Thank you all so much for you much needed advice it has been very helpful.[]-Blondie
Newbie comin through!
Bec, if you are planning on following Chan$ and Celivia’s advice (good advice btw) make sure that you set up the loan so that it has an offset account.
Remember that as you use equity from the (now) IP to purchase your new home (PPOR) you cannot actually claim that on your tax.
So if you also plan to ‘pay as much off as you can’, then put the extra payments into an offset account, and use this money towards the (new) PPOR.
Cheers
Mel
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