Well, I have finally worked up the courage to join this forum – no longer living through my husband’s posts… I hope he likes my username
I’ve just been talking to someone who has given me some fantastic advice, but I’m a bit confused about some aspects of it. Here are the details
Our situation
2 investment properties, very close to being positively geared
A PPOR
Our plan (all financials have been approved)
Move out of our PPOR making it IP#3.
Buy a PPOR house closer to family and friends (rent it out until the end of financial yr)
PPOR
Owing: $350k (have also borrowed, and spent $50k against it)
Worth: $470k (conservative estimate)
Rental estimate is $470/week
After factoring in body corp fees and land tax this would nearly be positively geared.
We would like to keep this property because it is in a very nice suburb and we might want to move back at some stage…..
The advice I got was to get rid of the emotional attachment to my current PPOR (fair enough). Sell it, and with the money earned buy two properties off the plan and flip them (I hope that’s the right terminology)! This sounds great to me, even after my husband filled me in with all the risks involved with ‘flipping’.
The reason why I’m confused: Apparently if we make our PPOR into an investment we would have to pay capital gains tax (I can't remember on what - maybe any profit we make on rent)? Our accountant has also said to us once before NEVER make a PPOR into an investment - for tax reasons. I have never understood this.
I was also told that we wouldn’t be able to depreciate much of our PPOR because its 4 years old (townhouse)
After reading my post I guess I understand the whole depreciation thing… we would be able to depreciate a lot more if we bought a house off the plan but then again it wouldn’t be positively geared.
It would be great to receive some responses around the tax question but I would also be interested to hear about what you would do in this situation … and just to make it even more tricky, pretend baby #1 is 12 plus months away.....
Let me know if I need to provide any further details.
I’ve just been talking to someone who has given me some fantastic advice, but I’m a bit confused about some aspects of it. Here are the details
Our situation
2 investment properties, very close to being positively geared
A PPOR
Our plan (all financials have been approved)
Move out of our PPOR making it IP#3.
Buy a PPOR house closer to family and friends (rent it out until the end of financial yr)
PPOR
Owing: $350k (have also borrowed, and spent $50k against it)
Worth: $470k (conservative estimate)
Rental estimate is $470/week
After factoring in body corp fees and land tax this would nearly be positively geared.
We would like to keep this property because it is in a very nice suburb and we might want to move back at some stage…..
The advice I got was to get rid of the emotional attachment to my current PPOR (fair enough). Sell it, and with the money earned buy two properties off the plan and flip them (I hope that’s the right terminology)! This sounds great to me, even after my husband filled me in with all the risks involved with ‘flipping’.
The reason why I’m confused: Apparently if we make our PPOR into an investment we would have to pay capital gains tax (I can't remember on what - maybe any profit we make on rent)? Our accountant has also said to us once before NEVER make a PPOR into an investment - for tax reasons. I have never understood this.
I was also told that we wouldn’t be able to depreciate much of our PPOR because its 4 years old (townhouse)
After reading my post I guess I understand the whole depreciation thing… we would be able to depreciate a lot more if we bought a house off the plan but then again it wouldn’t be positively geared.
It would be great to receive some responses around the tax question but I would also be interested to hear about what you would do in this situation … and just to make it even more tricky, pretend baby #1 is 12 plus months away.....
Let me know if I need to provide any further details.