IP --> PPOR --> IP Again?

[lenojd]

I have about 230-250k and want to buy a IP/PPOR (will explain this shortly).

I am planning on spending between 500-600k in the inner city Sydney.

I plan on leasing it out for the 1st 6 months to a year and then living in it for a number of years after that. I do not plan on living at this location in the long term so would like to lease it out again at a later stage.

Borrowing power and serviceability on my salary is ~350k.

Should I buy something with the largest loan I can (let's assume purchase price us 550k, with a 350k loan), using the cash to make up any shortfall in purchase price (200k)... if I do this, what should I do with the remaining 50k savings? At this stage it will NOT be my PPOR yet.

When it comes to moving in as my PPOR, I will shift all my cash into an offset account to reduce interest repayments.

Now jumping forward 5 yrs and I want to move somewhere else, can I simply use the money I have built up in the offset account to use as a deposit to purchase somewhere else? Subsequently increasing my original mortgage back up to ~350k for a tax benefit etc..

Am I on the right track here or should I be doing things differently?

thanks

 

[just do it]

lenojd

You should live in it for the first 6-12 months then move out...
advantage is then you can nominate this property as your principal place of residence for the next 6 years thus all capital gain in that time is tax free

JDI

 

[Stooge007]

^^ i agree 100%.

although you can only move out and use it as an IP for 6 year blocks, for it to still be capital gains tax free

 

[lenojd]

what is the basis for something becoming cap gains tax free?

ill have to do some research into this!

thanks

 

[Les]

G'day lenojd,

what is the basis for something becoming cap gains tax free?

You said a good thing - check it out. As I understand it, though, it goes something like this:-
1. You move in and occupy it as your PPOR (Principal Place Of Residence)
2. You move out again later (no time specified, but you need to show that it WAS your home - check it out).
3. It remains your PPOR (i.e. you continue to rent personally - or perhaps buy a place that you DON'T specify as your PPOR - whatever)
4. Before 6 years is up, you move back in, or cease to rent it.

I think that's it. Certainly useful if it fits your circumstances. It is worth spending some time in confirming the details. Good luck with it,

Regards,

PS The usual disclamier - I am not an adviser, just another bloke with an opinion