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Hi, I intend to buy a house of 3 bedrooms of which I will occupy one bed room, and rent the other two bed rooms out. Is there any complication in terms of First Home Buyer Grant, Tax deduction and Legal issues? Am I at disadvantage in doing so? Can I do that?
On the other hand, can I buy an existing house with tenants (say mother & son, on month by month rental basis) living in already and take over the tenancy from the vendor? and negotiate the terms and conditions with them?
Thanks for your help.
Regards,
Jack.
Hi Jack,
In situation 1, where you live in the house and rent out rooms, there shouldn't be any issues with you claiming the FHOG. Issues will arise when/if you try to claim the interest as a tax deduction – any mortgage you take out is for owner occupied purposes, and is therefore (technically) non tax deductible. You also will not be able to use the income that you derive from renting out the two bedrooms to assist you in satisfying the banks servicing criteria – you will need to be able to do that based off your own salary and other income.
In situation 2, where you take over a month to month tenancy, you could get the FHOG if you intend to live in the property for a continuous period of 6 months within the first 12 months. With the tenants being on a month to month tenancy you are able to request that they go on to a periodic (i.e. 12 month) tenancy at any time – if they choose not to, then maybe look at getting it re-tenanted – there are costs involved with this.
I hope this helps.
Warm regards,
MikeHi Mike,
Thanks for your advice!
Regards,
Jack.
