All Topics / Help Needed! / Should I buy a PPOR and turn it to an IP ?

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  • Profile photo of chetnik73chetnik73
    Join Date: 2007
    Post Count: 47

    Hi All

    I was wondering if anybody has used the strategy of buying a PPOR and only paying interest only, then converting it to an IP ? We are looking at Sydney as an option but the prices (with principal and interest) are high.

    Thought maybe somebody has done something similar. If anybody can help particularly with the rules ie how long do we need to reside in it and CGT impacts that would be great.

    Profile photo of freelancefreelance
    Join Date: 2008
    Post Count: 93

    To get the FHOG you need to live in the PPOR for 6 months within the first 12 months of settlement. After that, it can be converted to an IP.

    You will also receive a 50% Capital Gains Tax discount if you own the property for 12 months.

    Profile photo of chetnik73chetnik73
    Join Date: 2007
    Post Count: 47

    Thanks freelance2020. Any ideas on this as a strategy though?

    We are a young couple with one IP currently. We would love to buy another IP whilst rates are low and lock in a fixed term for three years just to see what would happen, then decide in three years if we hold or sell. Out of pocket expense would be minimal. Only problem is that we also want our own home and in Sydney. If we lock all our money into a deposit I fear we would put ourselves out of the chance to own another IP for ages. We beleive the current period is prob our best chance for an IP.

    Just trying to think outside of the square and achieve both. We arent concerned which order we do it in.

    Any tips from the pro's out there would be greatly appreciated

    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    A number of my clients have done that – buy, get the grant, live for 6 months and then move out and rent it. Worked well – but now with low interest rates it may work out cheaper to stay in the place rather than rent it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

    Profile photo of Richard TaylorRichard Taylor
    Join Date: 2003
    Post Count: 12,024

    Hi Chetnik

    Nothing to stop you taking out a 95% IP loan sitting the balance of your savings in a 100% offset account and then using the savings plus your First Home Owners Grant as deposit when you find your own property down the track.

    Richard Taylor | Australia's leading private lender

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