Spare room capacity

[DavidMc]

Not all OO or investors will want or need to maximise the utility of the asset (wear and tear, increased maintenance issues, public liability issues, legislative/regulatory problems etc etc).

I think one of the biggest would be the tax implications / loss of CGT exemption.

Things would have to get pretty damn extreme before families let 'strangers' live in their houses with their children. It's like telling someone to go without a mobile phone.

I agree it will occur to an extent. Maybe 10% of capacity? Again, another impossible to measure emotional factor. At what dollar point will people give up their privacy/security/lifestyle want? Time will tell.

 

[Peter 14.7]

I think one of the biggest would be the tax implications / loss of CGT exemption.

Add land tax liability, and insurance question marks and public liability issues.

Which by the way are very good points. If you rent out a room and they fall on your steps are you covered? If they burn the toast and down go the house are you covered?

Peter

 

[keithj]

People buy large houses they don't really need because "take out the biggest mortgage you can afford" (to maximise capital gains) has been the motto of a generation.

Very good point HG. People buy bigger houses than they need because they have a free choice and they like keeping up with the Jones. I can't see people changing much in the next generation. It all comes back to peoples emotions, desires, wants.....not their needs (as perceived by you).

Where do you live ? In a nice apartment IIRC. Do you need to live there... couldn't you live in some hovel ? Or do you want to live there ?

 

[Peter 14.7]

Hello Hired Goon

Let me start by saying i dont mind you posts. I know a few here get upset but , with all due respect to my fellow mebers, back when I joined we had a number of vocal and articulate "property is not the best investment" members.

Added spice in my opinion and provided people play the ball and not the man then they debate adds value.

I think on your comment above on the room I will agree many young people are staying at home longer than ususal due to the cost of housing. However on the other end , people are living longer, staying in PPOR longer, so the overall demand population is greater.

On people renting out rooms my only experince is my elderly mum. She had an IP from us. That I can you is a charity but moving on... Anyhow she had a close family friend she treated as a grandchild stay with her whilst at Uni.

However whilst she argued she got rent it was much more for the company as by the time Mum feed her etc.. it was a love job. Only lasted 12 months and she has since got married and moved into a house with hubbie.

Peter

 

[HiredGoon]

I think one of the biggest would be the tax implications / loss of CGT exemption.

As far as I know, you don't pay tax on boarder income, and it doesn't change your PPOR for tax purposes.

Things would have to get pretty damn extreme before families let 'strangers' live in their houses with their children. It's like telling someone to go without a mobile phone.

It is unlikely people will share with young children, but the nuclear family is actually the minority household now, isn't it? Think instead of students or single people sharing, or old ladies renting out spare bedrooms (this was a traditional income stream for widows retirement for hundreds of years)

 

[tor]

As far as I know, you don't pay tax on boarder income, and it doesn't change your PPOR for tax purposes.
...

"
Taking in a boarder is another way of boosting your income, but you need to get advice on the tax implications. You need to make sure you can prove the money is going towards household expenses. If not, it will be classified as rent. This means you could lose a portion of your capital tax gains exemption as you’ll be seen to be running a business from your home. Get professional advice.
"

from here: http://www.news.com.au/business/money/story/0,25479,23776759-14327,00.html

 

[Peter 14.7]

The way the empty bedrooms will be used is not a direct renting out of bedrooms to strangers. Here is an example I know where it has happened:

I have a friend who can no longer afford their mortgage repayments, so they have moved back in with their parents (who had 2 empty bedrooms). They then turned their house into an investment property.

Thus, a whole new rental property came online adding to supply because of empty bedrooms in another house.

Correct but they moved out becasue they had too not becasue they wanted to. And a wise decision indeed. Either thier circumstances will change and they will move bacd OR they will find they cannot afford at all and they will sell and it could well be bought by an OO or IP. Sounds like they will try at best to do the former or why not sell now?

But if you look around the country, there has been massive housing over consumption which people have confused as investment. People also confuse decoration with investment, taking out LOCs to buy new kitchens, for example. People buy large houses they don't really need because "take out the biggest mortgage you can afford" (to maximise capital gains) has been the motto of a generation.
.

My experience is the average purchaser who buys a PPOR in the MC Masions , the majority of new homes, actually use a different logic. It is because they dont see themsleves ever moving, and this is THE home for life and hence they consider children when they come in the 3 to 5 years.

I amd constantly amazed that so many people willnot start small. When I am asked how to get into the market in Sydney is find the unit closest the CBD that your $ can afford to own and ego can afford to live with.

Some agree but most go NO WAY. I want a bigger, better place etc for kids etc.. and then proceed to rent for 3 years (in the very unit they would not buy) whilst the market moves up even further.

I agree people over comsume and decorate instead of invest in value but my theory on why is more the above than thinking about CG. IF CG was the drive rthey would be buying "dogboxes" in Kings Cross. I believe 95% of OO buyers put CG potential very low on the needs list.

Peter

 

[Peter 14.7]

"
Taking in a boarder is another way of boosting your income, but you need to get advice on the tax implications. You need to make sure you can prove the money is going towards household expenses. If not, it will be classified as rent. This means you could lose a portion of your capital tax gains exemption as you’ll be seen to be running a business from your home. Get professional advice.
"

from here: http://www.news.com.au/business/money/story/0,25479,23776759-14327,00.html

Ditto here. All income is taxable. YOu can neg gear it but then CG applies.

Sure you can get away with it but if your caught the ATO goes through everything. My mum even declared hers to Centrelink.

Not worth it unless you are renting and then subletting.

Peter

 

[HiredGoon]

Hmmm, I paid board to my parents before I moved out of home when I was 23 and I don't think they declared that!

 

[tor]

Hmmm, I paid board to my parents before I moved out of home when I was 23 and I don't think they declared that!

Yeah that is probably fine as you would have been an amount which could be seen as your cost to the household. i.e. your parents weren't making money off you.

Assuming you paid typical amounts of child at home board anyways.

No need to be over the top about it.

I should expect that if you were considering this path that any decent accountant can give you a pretty quick estimate of the amount that the ATO would consider acceptable. Can always just get a ruling from the ATO anyhow, probably the safest path...

http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/34047.htm&page=8

 

[DavidMc]

It is unlikely people will share with young children, but the nuclear family is actually the minority household now, isn't it? Think instead of students or single people sharing, or old ladies renting out spare bedrooms (this was a traditional income stream for widows retirement for hundreds of years)

Hmmm... fair point, although it's any household with kids, not just nuclear. Whilst the trend is growing, my gut feel is that people living without kids in dwellings that have spare room capacity who are also in hard on cash is still a small portion of the market.

Old lady OO's usually own their house outright and don't need the extra income to service a loan. Old lady renters (and all other renters) are generally not allowed to sublet, although we could see more house mate teams.

The OO's could use the income for living expenses but they'd be doing that already if they were going to. Maybe the rental crisis is making it more worthwhile for them now.

I've lived in HK and seen whole generations living in an apartment the size of mine (that I share with 1 mate). I can easily see this happening to an extent but it's a very slow trend and cultural change.

I think supply and demand will increase yields at a much higher rate than this effect can dampen it.

 

[depreciator]

Hmmm, I paid board to my parents before I moved out of home when I was 23 and I don't think they declared that!

So Goon, your parents now have a spare room? I hope you have enlisted them in your crusade and that you have bunged a displaced family in that room.
Scott

 

[keithj]

So Goon, your parents now have a spare room? I hope you have enlisted them in your crusade and that you have bunged a displaced family in that room.

Great plan Scott.... I hear they've got a garden too.... lots of space for tents & caravans (I'm preempting next months lame reason why there's not really a demand for houses at all). Wait till he explains to them that it'll mean there's less demand for housing and so theirs will be worth less.... I'm not so sure they'll go for it then.

 

[Jimmy255]

^^ Do they have a fridge? If Indiana Jones can fit in one then a family should have no problems.