Hi guys,
I’m currently living with my family in a unit I purchased a few years back, and am looking at purchasing my second investment property, however I’ve heard some real estate “experts” advising that I rent out both my properties (in order to capitalise on negative gearing an other tax incentives come EOFY) and that I should rent something that would suit my lifestyle and ofcourse reap the gains.
Anyone out there in the same boat? or know much about the gritty side of tax, law and reaping the profits!
Yes, financially you would be better off by renting out your unit and renting the one next door. But this would be dependant on the loan amount etc
This is because if your property is negative geared then you can claim any loss against your income and will save tax.
BTW, it is still possible to rent out your home and have it CGT exempt 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
also depends on your lifestyle. i have a couple of ips i would never live in
well my main concern is finding something suitable to live in for my family (wife and child), however at the same time I would like to get into real estate investing and would like to assess all options before committing.
ideally i would like to stay in the Coubrg area (median 650K), however this mortgage will tie me down for a lifetime! so instead i was looking at a few areas which i believe are quite affordable and potential for capital growth (although id prefer not live in those particular areas), which will mean i can invest and rent in the Coburg/Pascoe Vale area.
i mean in the end it’s all about saving and growing the portfolio and being able to negative gear will really benefit me.
Yes, but you also have to factor in non financial things too – the hassle of being told the lease won't be renewed and having to move, changing schools for kids etc.
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
I’ve already factored those things which is why ill be staying around coburg.
lease and having to move arent a real concern as i will most likely renting a house of one of my builder mates, however my main question is if it really is worth renting in order to be able to negative gear property?
Why not do some figures? On a $650,000 property the tax savings would be substantial I think.
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
good point!
do you know of any websites or if there is a basic formula for calculating negative gearing?
There are some calculators floating around the somersoft.com forum
But all you have to do is to add up expenses and deduct these from rental income.
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
Terryw wrote:Yes, financially you would be better off by renting out your unit and renting the one next door. But this would be dependant on the loan amount etcThis is because if your property is negative geared then you can claim any loss against your income and will save tax.
BTW, it is still possible to rent out your home and have it CGT exempt too.
To a certain degree is yes Terry, Can we say that if you are renting one if your room to a tenant downstairs, then we can say that 50% of the house is shared so that we can claim negative geared to ATO ?
Yes Henry, that would be possible, but you would lose the CGT exemption for 50%. But if you moved out completely you could retain it completely exempt in some circumstances
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
Terryw: very interesting.
So if I purchase a new property and then make it my primary place of resident and then rent it out, and evantually sell up ‘x’ years later, can I then nominate which will be my next primary place of residence in order to avoid CGT?
Yes, under s118-145 ITAA 1997 it may be possible
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 for explaining to us about that.
Cheers,
Henry
for me personally, i’d rather rent out the 2 properties and just live in a property via rent for the lifestyle.
i don’t want to be “tied down”, but that’s my view
diff people have varying opinions though, as shown here: http://www.bigpondmoney.com.au/articles/will-a-mortgage-wreck-my-life
You must be logged in to reply to this topic. If you don't have an account, you can register here.
