Rent or Share

Hi,

If I rent out my PPOR (3BR), can I convert the loan to IP and use it for negative gearing?

I am then intending to rent something smaller for myself for 1/3 of a price what my current repayments are.

Or is it better to share 2BR out?

Would that work?

Cheers,
 
If I rent out my PPOR (3BR), can I convert the loan to IP
Yes, you can turn your PPOR into an IP. You don't "convert" the loan. It is the same loan but the interest now becomes tax deductible due to a usage change of the asset.

......and use it for negative gearing?
Yes, you can neg gear it as long as the rent is less than the interest and other running expenses. Bear in mind if it is neg. geared now it will eventually turn positive as rents rise over the years. Then you will be paying tax on the excess rental income.


I am then intending to rent something smaller for myself for 1/3 of a price what my current repayments are.
Good idea and a way to "get ahead".


Or is it better to share 2BR out?
I take it that you mean to share out 2brms of your 3brm PPOR? If so, then taking in boarders is not considered to be income as far as the ATO is concerned. Neither though can you claim depreciation and a % of the mortgage interest and other expenses on the rooms you 'share out'.


Would that work?
It can. You just need to do the numbers. Also you need to consider the impacts of taking in boarders on your personal life....as well as insurance aspects.
 
Yeah, if one of your boarders does a runner and takes your stereo with them, you won't be covered. Generally not an issue when you're a broke student sharing and your furniture consists of two milk crates and a mattress, more of an issue when you are an adult earning good money and your stuff is worth something.
 
Or if one of your borders has a lovely cat that sits on your beautiful new black leather lounge, after you tell the border NOT to let this happen, and puts pin holes and scratches all over it for you (this just happened to us :mad:) then you will wish you never got a border !!!
 
Or if one of your borders has a lovely cat that sits on your beautiful new black leather lounge, after you tell the border NOT to let this happen, and puts pin holes and scratches all over it for you (this just happened to us :mad:) then you will wish you never got a border !!!

Sounds like you need to put up some borders for your boarders... Sorry couldn't resist! :eek::eek:
 
Or if one of your borders has a lovely cat that sits on your beautiful new black leather lounge, after you tell the border NOT to let this happen, and puts pin holes and scratches all over it for you (this just happened to us :mad:) then you will wish you never got a border !!!

I watched in amazement (before I had any children) as my sister-in-law decided to change her baby on another sister's black leather couch.

Not only did she change a nappy ON the leather couch, but proceeded to stick the two nappy pins into the arms of the couch :eek:.

I've changed plenty of my own childrens' nappies on my OWN leather couches. It is something you do.... or not :D..... but to stick two nappy pins through someone ELSE'S leather couch just left me gobsmacked.
 
We're starting to get pinholes in our red leather couch after having a cat for several years - she puts holes in jumping up on the top of it. They're not bad though, more damage has been done by toddlers with pens.

Now, I have an ancient (by no means antique) clunker of a varnished pine wardrobe with several empty suitcases stacked on top, and the cat sleeps on top of it. Because it is so tall the cat has to push up with her back feet as she jumps up. The front of the wardrobe has some MASSIVE scratches on it up the top from the cat. Fortunately the wardrobe was a freebie and I'm not especially attached to it.
 
The cat issue can be easily solved with 'no pets' clause in the contract. No 'nappy changing' I guess could be added too.

But let's get back to the subject.

Would the banks be ok with using the property as IP and only paying home owner interest rates?

I am assuming home owner and investment loans have different interest rates.
 
They don't. They have exactly the same interest rates, everything. The only difference is what you use the money for, and then all the tax nonsense with deductablility, CGT etc.

Which reminds me, I really need to get my cat off that wardrobe and get her to do my tax for me ...
 
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