Renting over buying



From: Jason Prestwidge

<PRE>My sister is looking to move to Concord, but the price range is a bit out of her league at the moment.
Her realestate agent freind, has advised her and her husband to rent out their existing home for an investment, this would be positively geared as they would believe they can get $270/week at Canley Vale over the $120,000 loan.
They then will buy another IP geared neg' to balance the two out.
They then will rent a villa in Concord for 5 to 7 years to gain growth in their IP's and sell one or both to fund the purchase of the dream home.

Q1; Is this a viable strategy, and what catches are there?
Q2; If they use part of their rented home as an office, can they claim the same portion of the rent as a deduction?
Q3;Do they just advise the bank that their old home loan will be an IP loan, and the interest rate and red tape changed accordingly?

If someone here has been down this path before or nows the ins and outs, could you please answer these quick Q's.

Cheers Presto</PRE>
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Reply: 1
From: Sergey Golovin

Quick answer -

Q1. Yes
Q2. Yes
Q3. Yes

All 3 questions – yes/positive/affirmative/can be & was done before.

Cut it short, to get to the point - anything which is give you an income is an asset, anything which takes money out of your pocket is liability (as per R. Kiyosaki).

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