Advice on IP and Future Goals

[brocky05]

Hi There


Just after some advice a bit of background information first im currently 32 years of age and rent a house to llive in myself. I have a mortgage for a investment property I now lease out. I bought the property in 2009 for $452,000 lived in it for about a year it didnt work out so moved away. I tried to sell it but bad area couldnt even sell it for 80,000 less than we paid for it. The house is in my other halfs name also so I really only can claim 50% on tax deductions etc. Since I cant sell it I was thinking more long term in keeping it and using it in retirement for income then to supplement my most probably pathetic super amount. What are the advantages in doing this? My super is probably going to be dismall just wondering with an ip if you will loose the pension etc as you have income and an asset they value plus your super? Also is there anyway I can have the house changed just into my name excluding any costs so I can claim 100% deductions or is that to late now. I currently lease it for $360 per week and the mortgage I owe is only $165000. Iam getting very impatient though and want to buy a PPOR but my goal was to own the investment property in the next few years be debt free for a year then take the plunge for a PPOR and have that paid off before retirement. What would I be best off doing> Thanks for the advice everyone....

 

[Rolf Latham]

My Primary advice is to nor focus on the debt, but the NETT debt.

Convert the IP loan to an IO loan with 100 % offset and park your spare cash in the offset.

you will thank me later when you buy the new PPOR

ta
rolf

 

[jrc]

Hi Brocky05, Rolf has as per usual given you some good advice. If your IP is in NSW you will need to pay stamp duty on half so around $6000 plus legals.

I would think if you only owe $165000 that the house would be positive cashflow or close to it unless you have some good depreciation left.

What is the house worth on the market? is it $450000 which you paid or is it $370000 which would be $80000 less? If it's worth less than you paid then your partner would have a capital loss of $40000 on these figures which can only be set off against capital gains and as it was your PPOR the cost base would be the value at the time the house was first rented out so if the value dropped in the time you were living in it you've potentially got other CGT issues further down the track. But if you bought your partner out at the lower value and prices tise and you sell you will have a taxable capital gain as your partner's half you bought won't be covered under the 6 year absence from your PPOR and your partner has a capital loss that might never be set off against a capital gain.

At the age of 32 don't try and predict the future with pensions and super. The only certain thing is over the next 30 years the rules will change several times.

Is the property a good investment at its current market value? If it is then there might be things worth doing. If it isn't then you should look at selling it because keeping a poor performing investment for the next 30 years will have more impact on the quality of your retirement.

 

[Paul@PFI]

Hi Brocky05, Rolf has as per usual given you some good advice. If your IP is in NSW you will need to pay stamp duty on half so around $6000 plus legals.
QUOTE]

Not necessarily. He said 'ex". There are exemptions available provided the transfer is part of a family law settlement. If you havent made settlement with ex your debt could increase if property value rises. You need to address that and not allow it to continue. Its not a CGT trigger either to acquire the other half under a matrimonial settlement (incl defacto). Legal advice needed on that. It could see you own 100% of house and refinance any loans so you hold 100% of the loan too for no duty and no CGT. Basic tax rule is you deemed to have acquired 100% not 50% + another 50% later. You might acquire 100% for little or no actual cost. Legals to transfer not a lot. Go see a solicitor.

Forget about pensions friend. You are 32. There wont be a pension in 40 years and you will probably need to be 85 by then too. The worst problem someone can have is too many assets and too much income and no pension. Imagine Gina Reinhart complaining she doesnt get the pension. Bring it on you dont want the pension ! Super only counts after you access a condition of release. Again it rising too...60 and maybe rising ??

Strategies to increase wealth through super and property should BOTH be a focus. Super is unavoidable so embrace it and make it work too.