Renting of PPOR

[Punter]

Hi,

My first question here. Thanks in advance for the replies. This is an ocean of knowledge here!

Please direct me to the threads if these questions are already replied.

I recently moved to Perth. New to property investment. Learning from this forum.

Deal finalized for my first house. Want to actually make it my PPOR. But for mutual convenience, the owner as well as I are happy to move into PPOR after six months. Till then the current owner will be my tenant.

Getting the FHOG for the house as I am planning to move in within 12 months.

Now the problem. As this is my PPOR, I wish to take the minimum amount of loan and finish it off as fast as I can.

But as it will be IP for the first six months, should I take the maximum possible loan to maximise the negative gearing by keeping my funds in bank as term deposit till I move into the house? I will be in the top pocket of the income tax of 48.5% based on my salary income.

Is there any spreadsheet for this preliminary home work on income tax?

Any problem with converting an IP to PPOR?

What are the income tax consequences of this mix up (IP/PPOR) in the long run with respect to capital gains?

My wife is not working. Should we buy the property in joint name?

Regards

 

[MichaelW]

But as it will be IP for the first six months, should I take the maximum possible loan to maximise the negative gearing by keeping my funds in bank as term deposit till I move into the house? I will be in the top pocket of the income tax of 48.5% based on my salary income.

Punter,

No need to leave the spare cash in the bank as a term deposit. You're better off funding the mortgage in to an offset account linked to that mortgage. If you're planning on turning the PPOR in to an IP, then this gives you ready access to cash for the deposit on your next IP and no need to refinance or LOC to access.

And so long as it is your PPOR you can just leave that cash in the offset account where it is effectively "off" your mortgage anyway.

Cheers,
Michael.

 

[Les]

G'day Punter,

My wife is not working. Should we buy the property in joint name?

I am also the "wage earner" while my wife is not (and I'm also on 48.5% Tax rate). For my situation, I use "tenants in common" which allows me to own the property WITH my wife, but it's 99% mine, and 1% hers. This means, I can't sell it without her signature, but I can claim the largest portion of costs to offset my Tax paid.

PLEASE NOTE:- There ARE Legal differences between "Joint Tenants" (which is 50/50) and "Tenants in Common" (the latter can be ANY proportion that suits - 80:20, 50:50, 99:1, whatever). Be sure to check this out before going too much further, to ensure that the "common" option suits your purpose.

Also, my Accountant (Dale-GG) always says "Start with the end in mind", and I should include that as food for thought. What he means (I think) is to consider whether this IP purchase is a "one-off" or whether you are looking to become a serious investor (several properties). Once again, it's different strokes for different folks.

So do get advice from your favourite team (Solicitor, Accountant, etc.) to arrive at YOUR best solution,

Regards,