Pro's and Con's of turning a PPOR into an IP?

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InvestorTOTOR
Participant
@david-de-mezin
Join Date: 2014
Post Count: 16
July 19, 2014 - 6:04 pm
Can you please tell me what’s your opinion?
- This topic was modified 9 years, 9 months ago by InvestorTOTOR.
Jamie Moore
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@jamie-m
Join Date: 2010
Post Count: 5,069
July 19, 2014 - 6:27 pm
Hi David
The biggest negative in my mind is when the principal on the PPOR loan has been paid down to a low amount and the property then gets turned into an IP. At this point, there’s only a small loan to claim a deduction from – and if the person purchases another PPOR, they often have a large non deductible debt set up against it.
This can be avoided with the right finance structure in place from the start which is IO with an offset. Here’s some more info on the structure from an article I wrote for Australian Property Investor magazine.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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superAndrew
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@superandrew
Join Date: 2014
Post Count: 188
July 19, 2014 - 8:51 pm
Pros: Interest and expenses will be deductible and it will generate income
Cons: CGT will only be partially exempt if you decide to sell it in the future
Cheers
Andrew
superAndrew | Property Analyser and Finder Tool
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Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
July 20, 2014 - 10:16 am
It is possible to avoid CGT totally yet still claim all interest if planned carefully
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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InvestorTOTOR
Participant
@david-de-mezin
Join Date: 2014
Post Count: 16
July 20, 2014 - 1:04 pm
Thank you all for your answers.
The idea behind my question is to be able t buy another PPOR now (I believe that it’s a buyer market at the moment around PERTH) and hold for a a couple of months or year my current PPOR in order to obtain to best selling price possible and generate positive cashflow in between.
Thank you for your comments
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
July 20, 2014 - 1:10 pm
In that case both properties could be exempt if you sell the existing one within 6 months of acquiring the new one – seek tax advice as you need to plan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au