We are wanting to turn our PPOR into investment property for lifestyle reasons. Unfortunately, being inexperienced when it comes to investing, loan structures, etc, we only owe $90,000 on the property (freestanding brick house in Prahran, Vic worth approx $1 mil). We are late starters but doing our best to learn how to do things better from this point forward.
We are both self-employed, husband earning very good income. Husband saves most of his disposable income. I use my disposable income to pay household expenses.
After reading lots of posts and chatting with some forum members, we are hoping the following is possible, legal and makes best use of our assets and income.
Would really appreciate comments on the following:
1.PPOR is owned jointly 50/50. Husband buys wife’s 50% share of freestanding brick house in Prahran worth approx $1 mil by refinancing current loan of $90 to $590k.
2.Husband pays Stamp Duty on the purchase ($25k on this newly purchased $500k share of the property – is this figure correct?).
3.Property now 100% in husband's name, with loan of $590k (IO/offset account).
4.Wife purchases new PPOR in her name only (using $500k received from husband plus cash savings of $260k). Will need to also pay stamp duty ($40 approx).
5.Once husband and wife move into new property, husband nominates the new PPOR as his principle place of residence.
6.Prahran property now becomes husband’s investment property.
7.Repayments on husband’s IP loan of $590k (IO with offset account) approx $39,000 per year. Rental of approx $700 pw ($36,400) would cover a good portion of IO loan. Other costs such as insurance, rates, maintenance, etc. would also need to be calculated.
8.Husband pays his "weekly earnings" into offset loan on IP (approx $500 pw drawn as “wages” from his company).
9.Wife continues to work and her earnings pay for all non deductible lifestyle costs, i.e. living in new PPOR that has no loan.
End goal: Husband has IP with 50% equity, negative gearing on his earnings and continues to save funds for future IPs in the offset account.
Wife would own new PPOR outright (asset protection of family home).
After looking at the pros and cons, we want to hold onto Prahran property rather than sell it to purchase new PPOR and a new IP. In a few years Prahran property will become cash positive, providing income when we retire. It also has potential to be further improved, possibly developed, etc. So has further investment potential. We understand we will have to pay CGT from the date it becomes an IP but only if we sell it at some point.
We are in our early 50s and plan to live in the new PPOR permanently (hoping to purchase small acreage Gisborne area up to $800k). Two grown up sons also want the country lifestyle and will continue to live with us rent free so they can make best use of income towards their own property investments.
Would really value thoughts of members. Can anyone see any pitfalls with the above? Sorry for longwinded post. There are quite a few posts though from others wanting to convert PPOR to IP. Hopefully my post will help other members who may be in similar position to us.
We are both self-employed, husband earning very good income. Husband saves most of his disposable income. I use my disposable income to pay household expenses.
After reading lots of posts and chatting with some forum members, we are hoping the following is possible, legal and makes best use of our assets and income.
Would really appreciate comments on the following:
1.PPOR is owned jointly 50/50. Husband buys wife’s 50% share of freestanding brick house in Prahran worth approx $1 mil by refinancing current loan of $90 to $590k.
2.Husband pays Stamp Duty on the purchase ($25k on this newly purchased $500k share of the property – is this figure correct?).
3.Property now 100% in husband's name, with loan of $590k (IO/offset account).
4.Wife purchases new PPOR in her name only (using $500k received from husband plus cash savings of $260k). Will need to also pay stamp duty ($40 approx).
5.Once husband and wife move into new property, husband nominates the new PPOR as his principle place of residence.
6.Prahran property now becomes husband’s investment property.
7.Repayments on husband’s IP loan of $590k (IO with offset account) approx $39,000 per year. Rental of approx $700 pw ($36,400) would cover a good portion of IO loan. Other costs such as insurance, rates, maintenance, etc. would also need to be calculated.
8.Husband pays his "weekly earnings" into offset loan on IP (approx $500 pw drawn as “wages” from his company).
9.Wife continues to work and her earnings pay for all non deductible lifestyle costs, i.e. living in new PPOR that has no loan.
End goal: Husband has IP with 50% equity, negative gearing on his earnings and continues to save funds for future IPs in the offset account.
Wife would own new PPOR outright (asset protection of family home).
After looking at the pros and cons, we want to hold onto Prahran property rather than sell it to purchase new PPOR and a new IP. In a few years Prahran property will become cash positive, providing income when we retire. It also has potential to be further improved, possibly developed, etc. So has further investment potential. We understand we will have to pay CGT from the date it becomes an IP but only if we sell it at some point.
We are in our early 50s and plan to live in the new PPOR permanently (hoping to purchase small acreage Gisborne area up to $800k). Two grown up sons also want the country lifestyle and will continue to live with us rent free so they can make best use of income towards their own property investments.
Would really value thoughts of members. Can anyone see any pitfalls with the above? Sorry for longwinded post. There are quite a few posts though from others wanting to convert PPOR to IP. Hopefully my post will help other members who may be in similar position to us.
