Renting from your own PPOR

T

Tin Tin

Hi Folks,

We have some cash flow issues at the moment yet wifey does not want to sell our PPOR as we are having a baby soon. I have sold one IP, one other has gone down in value and the other two are side by side in a development area and do not want to sell.

Can I rent this off my wife so she can get the tax deductions to help with cash flow?
Is it worth it?

I'm wondering what else we can do if this is not a viable option as the offsett is getting eaten into pretty quickly.

The house is in her name 100% as she bought it before we married.

I suspect the answer is no but after scrolling the forum, it looks as though some people have used similar strategies although in a trust. We don't have a trust set up.
 
Rolf Latham said:
hi

If this is only a short term situation, can you capitalise interest for a while ?


ta
rolf
Click to expand...

Hi Rolf, thanks for your suggestion, i'm not sure what capitalising interest is. Is this paying the interest at a future date? If so, I didn't know we could do this?
 
I assume you have done the obvious and looked at current loans. Interest only to improve cash flow, lower interest rates etc.
Credit cards with high repayment you can get rid off.

Is the PPOR a dream house you could rent out while you live in a smaller one for a while? Or rent out a room. Much as I hate to suggest it even move in with the olds for 12 months.
 
You won't attract capital gains on PPOR so why not sell and get something cheaper and pay down some debt. Buy something that needs painting and tidying up, then use it to live in it to tide you over till baby is a bit older and you can get something better. I guess this is not feasible if baby is imminent but I've successfully moved house with just 2 months before birth.

In meantime look at the IP which has gone down in value and see if there is anything you can do to it to lift the value so you can up the rent a bit. I tell you what there is nothing nice about juggling bad debt and poor performing portfolio with bringing up a baby while having no cash flow. Very stressful.

If you rent out your PPOR or try and use it for tax purposes in any way, you will lose the full amount of capital gains exemption - that is not so desirable. Can you get it revalued and try and get some extra cash (non-investment) to tide you over?
 
Doovalacky said:
I assume you have done the obvious and looked at current loans. Interest only to improve cash flow, lower interest rates etc.
Credit cards with high repayment you can get rid off.

Is the PPOR a dream house you could rent out while you live in a smaller one for a while? Or rent out a room. Much as I hate to suggest it even move in with the olds for 12 months.
Click to expand...


Cheers Doovalacky, yes have looked at current loans and calling banks this week to renegotiate interest rates. CC yes we pay these off monthly. I have suggested we rent out a room to wifey, she is not interested at the moment with a baby coming along. Have also suggested we sell the PPOR but she doesnt want to either... Long story but she wants to settle for awhile as we have been in and out of places for a while, renting our PPOR in the past etc to juggle our finances. In the end we may have to though - sacrifice one for the best end result.
 
arriety said:
You won't attract capital gains on PPOR so why not sell and get something cheaper and pay down some debt.

I agree, wifey needs some convincing. (She is not at all interested in property investing, just does it to keep me happy really!)

Buy something that needs painting and tidying up, then use it to live in it to tide you over till baby is a bit older and you can get something better. I guess this is not feasible if baby is imminent but I've successfully moved house with just 2 months before birth.

A good suggestion, - baby is due in 3 weeks but she has maternity leave for 3 months so that will help a bit. We have access to a further 25k in the Offsett so that will help but we really need to sell the PPOR - I just dont want to do it to her.. She will be gutted.

In meantime look at the IP which has gone down in value and see if there is anything you can do to it to lift the value so you can up the rent a bit. I tell you what there is nothing nice about juggling bad debt and poor performing portfolio with bringing up a baby while having no cash flow. Very stressful.

Great suggestion - I will look at this, the guy renting does not earn much money and is already paying good rent yet very god suggestion nontheless, there may be potential here. Yes, agree, it is stress

If you rent out your PPOR or try and use it for tax purposes in any way, you will lose the full amount of capital gains exemption - that is not so desirable. Can you get it revalued and try and get some extra cash (non-investment) to tide you over?
Click to expand...


I actually thought you could rent your PPOR and be CGT exempt as long as you live in it within 6 years of purchase?
 
Tin Tin said:
[/B]

I actually thought you could rent your PPOR and be CGT exempt as long as you live in it within 6 years of purchase?
Click to expand...

Not quite. Its CGT exempt for up to 6 years after you convert your PPOR to an IP, provided you do not claim CGT exemption on another property during that time (eg buy another house to live in).
 
If your wife doesnt want to sell the PPOR, and isnt really supportive of IPs, then I would sell the 2 side by side IP's..........
your relationship should be the priority here, and it sounds like she has been sacrificing her needs for your investing for some time,(you mention moving alot and renting etc) and with the baby coming, I think it would be better for you to make a sacrifice (even though its a sacrifice long term on her side, but she probably doesnt see that) rather than to expect her to make the big sacrifice of selling the PPOR........... just my thoughts!
 
I agree with Pennyk.

Also, you said the PPOR is in your wife's name as she bought it before you were married. So technically she is the one who has to sign the contract to sell.

Tin Tin, she is pregnant and nesting. A secure PPOR is all-important to her as she looks to prepare to nurture your child in the best environment possible.

Therefore, if anything has to be sold surely it should be one of the IPs.
Marg
 
marg4000 said:
I agree with Pennyk.

Also, you said the PPOR is in your wife's name as she bought it before you were married. So technically she is the one who has to sign the contract to sell.
Click to expand...

Oh, I'd forgotten that when I posted......... definitely, one of the IP's has to go!!
 
DaveMSydney said:
Not quite. Its CGT exempt for up to 6 years after you convert your PPOR to an IP, provided you do not claim CGT exemption on another property during that time (eg buy another house to live in).
Click to expand...

Or rent elsewhere?

pennyk said:
If your wife doesnt want to sell the PPOR, and isnt really supportive of IPs, then I would sell the 2 side by side IP's..........
your relationship should be the priority here, and it sounds like she has been sacrificing her needs for your investing for some time,(you mention moving alot and renting etc) and with the baby coming, I think it would be better for you to make a sacrifice (even though its a sacrifice long term on her side, but she probably doesnt see that) rather than to expect her to make the big sacrifice of selling the PPOR........... just my thoughts!
Click to expand...

Happy Wife...Happy Life :D
 
Thanks Marg, Penny and Redwing, appreciate your feedback.

My wife does support investment property, she just doesnt think about it all that much - just lets me follow my interests basically and comes along for the ride.. She is pretty good to me I must say.

It is difficult because I certainly dont want to uproot her yet keeping it means that as a family we will be far better off in 5-10 yrs time if we keep it. It will give our little boy, my wife more opportunities as we will make far more profit down the track, especially if we get DA approval. The IP's are also in a catchment area of a school we would like to send him to down the track.

I am always a big believer of delayed gratification and if we can have some short term pain in the next yr or so, maybe it will all be worth it in the long run? Maybe I am wrong and should just sell out and keep her happy in the short term. Decisions, decisions,!
 
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