Hello,
I have finally moved out of my PPOR (loan approx. $230k) and brought another property that is now my PPOR (loan approx. $380k).
The house I moved out of, is now being rented at $1,300 per month.
I have just realised, with my I.O loan the monthly repayment on this house is approx. $500 per month, which I believe mean’s it is positively geared.Any suggestions how I can turn this around so that it is negatively geared to bring down my tax?
Thank you,
KatySo you’d like to find a way to start losing money so you can reduce your tax (by a fraction of what you’d need to lose)?
Exception would be depreciation if you haven’t already organised a schedule.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Tiger,
Congrats !! I hope your new PPOR has an Offset Account attached to one of its mortgages :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697973Sorry to hear you weren’t aware of them earlier – it would have eased the path from PPOR to IP remarkably, leaving the full mortgage set up against the new IP. Your money in the Offset account gets used to pay Deposit/Costs for your new PPOR. I’m sure you will set one up against the current PPOR (in case it becomes an IP later too).
As to “What to do now?” this really depends on where you are at financially, and where you are heading?
See, if you were wanting to invest some more, any borrowings for investment (another IP, shares, etc) can be Tax deductible – so, if your goals say “Buy another IP”, then borrow against the new IP (your old PPOR) and claim the Mortgage Interest in the usual way.
In times of uncertainty, having a bit of extra cash is no bad thing though – so being positive geared for a bit sounds like good news to me. Still, if another investment will lead to extra Growth at the expense of a bit of cash now, then that can work too. Good luck with your next move,
Benny
Consider a related party sale
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
Nothing wrong with making money :-)
Having said that – the situation could have been improved if the original loan was set up as interest only with an offset.
Here’s an article I wrote that explains the structure – http://passgo.com.au/blog/item/15-interest-only-with-offset-account-structure
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The original loan did have an offset account and money was going into their. Silly me made the mistake of increasing the repayments instead of keeping the money in the offset in the last 12months. I don’t know why I made that change, I just did.
Thanks Corey. When you word it like that, I guess it does sound stupid. Yes, I did organise a depreciation schedule :-)
Thanks Benny. Yes, I do have an offset account linked to my new PPOR. I plan to see this house out for 10-20 years and start to raise a family. Goal would be to pay down the new PPOR as much as possible and be able to be financially okay with one parent staying home. If I will rent this house or sell in donkey’s years to come – I have no idea. I guess having the I.P as positively geared is a good idea and will help having the cash flow when the time comes. I just read a lot that negative geared was a good way to go when on a good salary. Thank you for your opinion.
Thank you TerryW & Jamie Moore.
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