Upgrading PPOR

Hi guys

I've been reading this

http://www.somersoft.com/forums/showthread.php?t=54387

and this

http://www.somersoft.com/forums/showthread.php?t=54502

but it's giving me a headache.

My situation:

Current PPOR - townhouse
Purchase price: 260k
Loan: 100k variable + 100k fixed with 100% offset account
Current Residex value: 320k
(yes newbie mistakes there)

I am looking to buy a home and land package costing 445k. So what I can get from my townhouse is 330k x 80% = 264k. 264k - 200k existing loan = 64k for house deposit. Once the house is built, I intend to move in and make the townhouse an IP.

Questions:
1. Would the interest on the 64k be tax deductible after the townhouse becomes an IP?
2. My calculation (264k - 200k existing loan). Is this correct with one loan being a fixed loan or this wouldn't matter?
3. With an estimated weekly rent of $320 for the townhouse, would this be a good return?
4. If no to question 1, what would you do if you were in my situation?

Thanks
 
Y-man,

Won't the interest on the $200,000 ($100,000 fixed + $100,000 variable) be deductible once the townhouse becomes an investment property?

Regards
 
Not only would the interest on the 64k NOT be deductible, but the interest on the entire $264k will NOT be deductible.

Cheers,

The Y-man

So in order to have a tax deductible IP, you'll have to buy it as an IP from the start? And once you live in it or use funds from the loan for private purchase, the interest on the loan will not be tax deductible? Is this correct?

I would actually contemplate selling, and using the proceeds to buy the new PPOR (and an IP as well?).

Cheers,

The Y-man

Depends where it is.....

Cheers,

The Y-man

I would rather not sell because if I was a (student, couple or small family) renter, this townhouse is something I would look at renting.
 
Not only would the interest on the 64k NOT be deductible, but the interest on the entire $264k will NOT be deductible.

Cheers,

The Y-man

The way I read this is that the $64k would not be deductible but once the existing PPOR became a IP the $200k on the loan would be deductable.

Cheers

Pete
 
Y-man,

Won't the interest on the $200,000 ($100,000 fixed + $100,000 variable) be deductible once the townhouse becomes an investment property?

Regards

The way I read this is that the $64k would not be deductible but once the existing PPOR became a IP the $200k on the loan would be deductable.

Cheers

Pete

Apologies. Obviously didn't read the post too well.

Yes, the 200k will be deductible

Cheers,

The Y-man
 
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