Simple question

[rosewaterwrx]

Just a simple question guys.

I own 2 properties 1/2 share with my brother.

1st property (rental) - owe $58,000 .....worth $$250,000-$280,000
2nd property(live in...for now) - owe $230,000 ...worth $230-$250,000 ....after perhaps $30k worth of repairs Id bump this to about $300,000 minimum.

Due to the fact id like to seperate our funds...and also my insecurity about world finances, aust house prices especially ( I feel Aust house prices will flatline at least for a longish period........either that or drop signifigantly and then later recover).


I am considering selling the first property ( That I Rent)....and using the income to pay the motgage on the 2nd ( that bro and I live in)...along with the 30k of repairs.

Then after a 2-3 year period of signifigant saving...depending on world economy get back into the game.


Now I bought the house in 1997 and paid $70,000....its now worth say $270,000.

What taxes, commisssions will I pay if i do sell this property??????

 

[Peter_Tersteeg]

You might want to speak with an accountant or solicitor/conveyancer regarding this, but you'll have to pay capital gains tax if you sell the property. You may have to pay it even if you sell it to your brother (but there may be some way around this).

If you sell, you'll also have to pay the appropriate agents commissions and probably advertising costs.

I tend to disagree with your suggestion that prices are going to drop. I can't really comment on Adelaide, but in Melbourne, the combination of rising rentals, high immigration driving future demand, a massive under supply of property and lowering interest rates points towards good capital gains over the next few years.

 

[BV]

rough calcs here
approx $200K CG, 50% taxable= $100K
income tax= approx $40K
so you will be left with approx $160K minus your selling costs.

If you put that amount in your PPOR you will be saving approx $250/week.
Considering the long term benefit of not having to pay interest on your PPOR
IMHO it's worth it.

Reducing your PPOR loan will also improve you ability to hold more IP's

Pt_Bear makes a good point though on possible CGain loss if property prices keep on going up but you can address this issue by buying another IP and using your new equity in your PPOR you will be able to borrow 100% of the new loan and all of it will be tax deductible.

cheers

 

[rosewaterwrx]

Ok thanks for the advice.

I have actually lived in this property for periods up to 1 year. I last lived in the property 4 years ago for about a year.

If I were to move back in would I assume id be eligible to have this property counted as for purpose of living and not pay capital gains?? Is this correct.