Renting rooms

[avaseer]

Hey guys, got a couple of questions for you.

There has been a little bit of information in other posts, but have a few questions i'd like a firmer answer on.

I currently have 2 IP's and looking for a rental, but since the rental market in perth is REALLY tough atm, i'm considering other options.

If I moved into one of my IP's which is in quite a nice area, and rented out the other bedrooms (it's a 3 bedroom place) what are the tax implications? since It'll be income generating but also a PPOR the situation has confused me.

I will also be looking to make major renovations (adding a bedroom and ensuite) to maximise the downtime for the investment so it's not just wasted time, will that affect any outcome? Say if I kept it as a rental but had a planned vacany to do renovations.

If anyone has any experience renting out spare rooms I would love as much information as possible.

Also does anyone have experience with major renos? how much would an extra bathroom and bedroom cost (extremely rough estimates)?

Finally my IP that I want to do work on has a decent chunk of equity (loan 485k, valued 659k), what is the best strategy to release this equity for the renovations?

 

[Propertunity]

If I moved into one of my IP's which is in quite a nice area, and rented out the other bedrooms (it's a 3 bedroom place) what are the tax implications? since It'll be income generating but also a PPOR the situation has confused me.

There are a number of issues. I assume this will now become your PPOR? If so the tax implications are that the mortage interest and other expenses will no longer be tax deductible.

Now to the other part of your Q regarding renting out rooms. The answer is, "It depends".
What are the arrangements?
Are they sharing facilities such as bathrooms and the kitchen?
Are they signing a lease?
Or is it more of a private boarder arrangement? (In which case it is not necessary to declare the income, but neither do you claim any expenses for the arrangement).
If you are declaring income & claiming expenses, you will lose part of your PPOR's CGT-free status, but you've already done that by having this particular property as an IP previously anyway.
Back on your renting room/s thing, the ATO is not really interested in you negative gearing a couple of bedrooms. (they'd be neg. geared if the expenses for % mortgage interest, depreciation, utilities % etc., exceeds the room rent).

Read more on the links in this post:
http://somersoft.com/forums/showpost.php?p=838533&postcount=8