Advise Needed

[littlelee]

Hi,
Need some advise on whats best to do - currently we have a PPOR in Balnarring which we owe around $140,000 and is worth around $500,000, we have an IP in Balnarring and have just purchased another IP in Black Rock which we owe full amounts on both IP's. We would like to move into the Black Rock property and rent out the Balnarring property - this would be a bad move tax wise wouldnt it because we would then have to claim the tax on the Balnarring property and not be able to claim the tax on the Black Rock property, can somebody claify this for me?

Would it be better to sell the Balnarring PPOR and pay the money off the Black Rock property and move into it, then purchase another IP elsewhere?? Balnarring is probably not the greatest area for rentals, but has been great for CG. We would also end up loosing around $30,000 doing it this way with stamp duty on the next property and selling costs.

Any advise greatly appreciated.
Thanks,
Traci.

 

[marg4000]

we would then have to claim the tax on the Balnarring property and not be able to claim the tax on the Black Rock property, can somebody claify this for me?

That is correct. When a property becomes an IP the interest on the loan attached to that property becomes tax deductible.

Take your time, sit down and do your sums. Figure out exactly how much better off you will be by selling and buying again as opposed to accepting a lower tax deduction. Another factor is the quality of the properties you own, and their capital gains potential.

But realistically, if you work on selling your present PPOR to release $300K off your new PPOR, that is a saving of at least $18K a year based on 6% interest.

But one hint - DON'T pay it off the loan, put in in an offset account (obviously you won't touch it). That way you get the benefit of reduced interest payments, but retain the flexibility to turn the new PPOR into an IP in the future and simply withdraw the offset to reinstate the higher loan amount. We never know what the future holds.
Marg