Is this a good idea??

[MissMuffitt]

Hello again... Hubby and I had a brain storm over the weekend.

We came up with the idea of renting out our PPoR in Gladstone and renting our selves for a while.

That would give us 3 IP and we are looking around the Bargara area to rent.
We have seen a few houses for about $250 a week which look quite good.

Current situation is this:
1 IP at Agnes Water. IO Loan $305,000 8.89%. Value $320,000
2 IP at Corio. IO $151,000 8.79%. Value $165,000

PPoR is currently $244,000 8.89% PI loan. Value $380,000.
We want to get a few things done before we rent it out, Carport, new carpet and paint should be enough. Probably need another 15,000 for that to get done. Not sure on cost yet.
We could rent it out for $350 a week.

My question is this...

Is this a good way to get another IP? Does renting ourselves make sense if we only pay $250 a week it's at least 1/2 the cost of paying the house off and no rates to pay or maintance.

Also gives us time to look around and see if we like the area. May eventually buy there is we see the right house.

What are your opinions in this idea??

 

[ianvestor]

Does renting ourselves make sense if we only pay $250 a week it's at least 1/2 the cost of paying the house off and no rates to pay or maintance.

I think renting can be a good idea, however I would like at it slightly differently... Don't compare the rent you're paying to the cost of mortgage etc. Compare the rent you're paying to the rent you're receiving from the new tenant. It's this difference in amounts that you're saving each week. Because don't forget you're still paying for the difference between your mortgage and the rent received from the tenant.

I did this for a while when I was starting out, paying $170 to live in an old unit, while I had a tenant in my unit paying $240.

 

[Land]

Plus tax deductible

Ianinvestor is nearly right - you do need to look at the difference between tht rent you receive and the rent that you pay elesewhere, but you will also have an additional benefit with the shortfall between the rent you receive and the mortgage repayment being tax deductible.

Also, because you are doing the place up, you will be able to depreciate these items as well. So you will be much better off.

Just remember that you will have 6 years ticking away from when you move out if you want to sell it and not cop capital gains tax....

 

[josko]

Hi MissMuffet,

We are also thinking about doing this ourselves. The difference in the rent will save us $600.mth, not to mention the NG benefit.

Great minds think alike!

regards Jo

 

[younginvestors]

Just remember that you will have 6 years ticking away from when you move out if you want to sell it and not cop capital gains tax....

If you move back in within the 6 years, does this have the same effect of not paying CGT?

 

[Peter_Tersteeg]

As long as the rent you're paying isn't greater than the rent you're receiving, I've generally found that renting yourself puts more money in your pocket. The reasons for this are:

* Tax benifits if you're a landlord compared to a home owner - shortfalls, gearing, depreciation, repairs.
* As turnover of tenants in your house occurs, you can get substantial rental increases (in the right market), whilst if you stay in the same place yourself, the rent you pay tends to be stable.
* Living closer to work and the other things you do might save on transport costs.
* Did I mention the tax benfitis? In the past I've had a home office and claimed part of my rent. I don't do this with my PPOR mortgage repayments (to avoid CGT in the future).

I rented for many years and bought IPs and there were plenty of benifits. I also like living in my own home so I'm willing to miss out on those benifits now.