I live 20km from the CBD and I am interested in buying an investment property closer to the CBD to reduce commuting times.
My home is new and I am not sure I want to sell it right now in order to buy closer to the CBD.
If I buy an investment property, I know I need to live in it first so at least I have the option to declare which of the two properties is my home (for tax purposes) later down the track.
Does anyone know HOW I long I would need to live in the investment property?
Do I have to live in the investment property straight away upon purchase or can I leave it for a bit (so long as it is within the 6 yrs?)
Could I leave my current home empty but services connected whilst I live in the investment property closer to the CBD whilst I decided whether or not to sell my home 20km from CBD? Or for tax purposes would I need to disconnect services at my current home and connect new electricity/ water services etc at the property closer to the CBD.cheers
Nat
Speak to an accountant and broker ASAP and run the numbers. The glaringly obvious point is that your current property is new so if you converted it into an investment property you may be able to claim deprecriation benefits. How will this affect the overall picture?
Also which CBD are you talking about?
TheFinanceShop | Elite Property Finance
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Hi Shahin
I am referring to Melbourne CBD. My house is 7 yrs old. It was built 7 yrs ago. It is not new exactly.
The tax a/ct told me it would not be wise to rent out existing property and move into a new property close to CBD because I will have to pay tax on the rental income from 1st home. He said it would be better to sell it and buy a new one. But I want to keep both properties until I decide whether I want to move into the investment property (close to CBD) down the track (after I buy it of course)
But I like your thinking!
cheers
Nat
Hi Nat
Whether you sell or keep the property comes down to the costs of holding relative to achievable growth.
For instance, if it's costing $5k a year to keep – you'd want to be reasonably confident that you'll recoup this via capital growth over the long term.
Look at current market conditions, future infrastructure plans and any other key drivers that could add to growth when deciding whether to keep.
If you decide to keep both – structure the loans carefully and avoid crossing.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Hi Nat,
As you mentioned that you would have to pay tax on the rental income and your accountants advice on selling the property, it sounds like you would be positively gearing the current property if you rented it out. If so, that's not necessarily a bad thing. All comes down to the numbers.
From what I understand you can move into the new property (don't understand why you are calling it an investment if you intend living in it), and still declare your current property as your main residence for CGT purposes.
However in the end there will be some CGT to pay down the track as you can only claim one of them at any time as your PPOR.
Cheers
Tom
No minimum time period is specified in the legislation. Must genuniely make the property your main residence.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
nkrasn wrote:Hi ShahinI am referring to Melbourne CBD. My house is 7 yrs old. It was built 7 yrs ago. It is not new exactly.
The tax a/ct told me it would not be wise to rent out existing property and move into a new property close to CBD because I will have to pay tax on the rental income from 1st home. He said it would be better to sell it and buy a new one. But I want to keep both properties until I decide whether I want to move into the investment property (close to CBD) down the track (after I buy it of course)
But I like your thinking!
cheers
Nat
Rightio – then that is a different story. You may be able to keep both. The other thing to consider in this scenario is CGT. Again looks of different elements to consider along side doing the numbers so speak to an accountant and broker and set up a clear strategy.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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