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From: Mike .


Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: James
Date: 02 Feb 2001
Time: 10:56:51

My father has a $250k property which he will give to me as a gift when I get married in one year. He's a generous man, not rich.

I am also looking at buying my first IP worth around same price. I'm earning $65k a year and my fiance earns $35k, so together we earn $100k pa. Would it be more beneficial to live in the gifted house or live in the IP?

Downside to living in IP is that I can't negative gear it(not IP anymore). Upside is that I'll get $7,000 grant. My question is, can I live in IP and then transfer my loan to the gifted house and treat that as an IP so I can then Negative Gear and also get the $7,000 grant? Thanks.

 

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NigelW

Reply: 1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: NigelW
Date: 02 Feb 2001
Time: 13:31:01

You won't get the 7K FHOG if you or your partner own a dwelling, despite the fact its an IP and not owner occupied.

Check out this web page. http://www.osr.qld.gov.au/fhog/html/eligibility.htm

Cheers N.

 

[WebBoard]

Kevin F

Reply: 1.1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: Kevin F
Date: 02 Feb 2001
Time: 12:44:23

My preference is not to negatively gear but if you've got your heart set on that strategy then here's a possible solution.

Buy a house so that you can get the $7,000 grant. Use the equity in the house that is gifted to you for deposits + costs for some IP's. The IPs can then be negatively geared. You wouldn't want to negatively gear any more than $6000 per year as that's enough to drop you into the 40% tax bracket.

Hope this helps, Kevin

 

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Mel

Reply: 1.1.1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: Mel
Date: 02 Feb 2001
Time: 12:33:02

Hi, I'm by no means an expert, I've only just started. But I guess I can still offer an opinion. What I would do in your situation is buy an IP in about 6 months time (look for one that is positively geared if you can - see other posts on positive vs negative gearing), and live in it for a few months before you get married, and before you get the gift house (hence you'll receive the $7000 grant, you don't need to live in it for a whole year.)

When you get married, move into the gift house, rent out the IP, that way you're not paying out any accommodation costs (and if you move back into the IP within 6 years you won't have to pay CGT on it if you sell, ?I think?).

Your next step would be to use the equity in the gift house to buy more IPs (possibly 3ish if what you say the house is valued at is correct). By using the equity in this way, all of the loans you have will have tax deductible interest payments if you do have to negatively gear at all.

I'd really appreciate any one out there picking this plan to pieces cos, like I said, I'm only just learning, so it would really help me out to know the flaws in this plan.

Mel

 

[WebBoard]

Sim

Reply: 1.1.1.1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: Sim'
Date: 02 Feb 2001
Time: 15:24:16

Remember that you can only ever have one principle place of residence (PPR) at one time.

What I am getting at is... you are suggesting a move into the IP first, live in it for a while to get the FHOG and to set it up as your PPR... then move into the gifted house to minimise costs (and claim interest payments on the IP loan), then move back to the IP within six years to maintain your PPR status on the IP.

That is fine, and if you maintain the IP as your PPR until you sell it, you will not pay CGT on the sale.

BUT you WILL pay CGT on the gifted property when you sell it, regardless... as it cannot be considered a PPR while you already have a PPR (the IP)... even though you are living in the gifted property.

Make sense?

Just something to think about!

Something else to consider is that if you move into the IP when you buy it so that you can get the FHOG, there will be limitations as to how much you can claim of the purchase costs (stamp duty, conveyancing etc.) when you do finally move out.

You need to consider whether the added costs are going to be more than the money you get from the FHOG.

The simplest strategy may be to just live in the gifted property from day one... it is free accommodation and that is worth a LOT, regardless of the value of the property ;-)

Then purchase an IP or two or three, using some of the equity in the gifted house to help... and then you get the maximum tax benefits for the purchase costs etc... it is much simpler overall... and you don't have to keep moving house ;-)

Sim'

 

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James

Reply: 1.1.1.1.1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!(forgot to mention)
From: James
Date: 02 Feb 2001
Time: 14:47:31

Thanks for you input\ideas. Forgot to say that I currently have $65,000 deposit for my IP if that makes any difference. Some interesting ideas so far. Keep them coming.

 

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Terry A

Reply: 1.1.1.1.1.1
From: Mike .


Re: Receiving house as a GIFT and buying 1st IP. Need ADVICE!
From: Terry A
Date: 03 Feb 2001
Time: 01:01:36

First of all decide where you want to live, in the house dear old dad wants to give you or another home? If you want another house as your dream home then use your $65,000 as a deposit, qualify for the FHOG and live in your dream home. Then dad can gift the house to you, use it as an IP with 100% positive gearing.

Now use the equity in the IP to borrow to buy a few more IPs that are also positively geared. Use the extra cash flow to pay off the dream home really quick then use your growing equity to obtain more IPs.

If you want to live in dad's house then use the equity and your cash to buy IPs.

Both methods have merits and it will depend on what your goals are.