PPOH to IP to PPOH to IP..? Confused..

Can someone show me the path to enlightenment..?? please...!!!

Situation.
Husband - Earning $80K
Wife - Earning $35K
2 Kids under 8.

Property / Loan Status.

1.Old ish PPOH @ Normanhurst.Conservatively self valued @ $420K atleast.(If rented out expected to get atleast $350/week)
Paying principle and interest. Still owing $255K to CBA on PPOH.
Borrowed $60K against PPOH to buy IP below. Both on variable @ current 5.65%

2. New ish IP - Conservatively self valued $340K @ Quakers Hill. Rented @ $320/week.
Interest only loan Owing CBA $260 on 9 % locked till 2011

Wifey now wants to move to Quakers Hill for following reasons
1. Better house.
2. Closer to friends and family

Option 1.
Move into IP @ QH and Rent out PPOH.
Cop the huge interest bill on chin till we come out of it.
We may not get much advantage of neg gearing on PPOH @ N'Hurst.

Option 2.
Rent out both IP and PPOH and neg gear on both.
For our own residence rent out any wife approved accomodation @ QH.

Options 3
Buy IP # 2 (if possible i.e.) and make it PPOH and start paying P/I mortgage.

Option 4. As suggested by Somersoft wizards.

Feel free to ask any questions as I may have missed finer details.

Thanks and regards
 
Just a few points:

  • The loan on your PPOR needs to be clean to be able to claim it on your tax. As you've had the property for a while there is a chance you've redrawn against the house to purchase a car, holiday etc. The interest on this aspect of the PPOR isn't tax deductible. The tax office is interested in what the loan was used for, not what is held by the lender as collateral.

  • You may be able to claim the 60k borrowed against your PPOR to purchase your invesment property as long as you've got records to prove it (I use split loans etc for this)

Personally I seperate my PPOR from my investing when I consider housing. I do this as the homes I like to live in are probably not good for renting and I like to minmise debt on PPOR which then stuffs everything up if I want to convert it to a rental. I know there are ways around this however they can get messy.

Hope this helps
Wayne
 
Hi Bear,

Thanks for your response.

* The loan on your PPOR needs to be clean to be able to claim it on your tax. As you've had the property for a while there is a chance you've redrawn against the house to purchase a car, holiday etc. The interest on this aspect of the PPOR isn't tax deductible. The tax office is interested in what the loan was used for, not what is held by the lender as collateral.

PPOR is clean. I have borrowed 60K against this to buy IP below. One thing I have learnt from Somersoft is NOT to buy a depreciating asset(non-deductible) with borrowed money.


* You may be able to claim the 60k borrowed against your PPOR to purchase your invesment property as long as you've got records to prove it (I use split loans etc for this).

As above. However I have kept is seperate and is not X colated it.
 
I'd lean towards option 2.

Moving into your IP will as you say lead to having to wear the interest bill without deductiblity for around 2 years. Rough estimate that IP deduction is worth at least $3K per year.

Only hassle is finding somewhere to rent that is wife approved and doesn't cost too much.
 
Can't add a lot here, except this sounds like a classic case of emotional investing.

Anyway, if you MUST move to QH, I would rent out Normanhurst (sounds like you'd get more rent anyway), and claim it as an IP.

It's all doable, just make sure you get valuations done during the transition, so when it comes time to sell, you can claim tax on the different portions of both places when they were deriving income...PM me for more details if you need this clarified.

Me personally, would stay put where I was...the extra 26 km for "family an friends" isn't worth the hassle...and going by the prices, your PPOR sounds better....don't forget, newer houses sometimes are synonymous with shitty neighbours/suburbs (although I don't know Sydney).

Good luck either way.
 
Or Option #4, get a new wife :p

We all know neK that you said that TIC. BUT despite the high running cost of a wife, getting a new one is soooooooooooooo much more expensive if you have to split the family assets down the middle and start again :(

After that, who's to say the new one will be any cheaper to run, just as faithful etc etc.

Enough of the family counselling from me for now :p
 
Hmm. An interesting dilema... A lot of people face these decisions and it comes down to whether you want to improve your lifestyle or speed up your investing as an immediate priority??

I personally have chosen to rent while maximising my investing power. This has enabled me to also have the flexibility of where I was running the company from - last year I spent 7 months in Queensland doing 6 major renos and now have the company head office based in Melbourne again. This however comes with it's own consequences - you're back at the mercy of a landlord again and they may decide they want to sell/increase rent/move back in themselves/etc and you don't have the power to just change something you don't like in the home.

You just have to weigh up what is more important to you and the family and make sure you speak to an accountant regarding number crunching to see how much you would be out of pocket with each option..

Wishing you every success,
Ana Stankovic
 
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