We bought our first house by cash…Need help from accountants and brokers!

Hi, it's not a mistake to pay cash for PPOR. I did that too, before I bought other properties.
A paid off PPOR is a great base for investing.
I used it to borrow for 3 PIs and 2 small commercial properties, all inside 4 years.
KY

its no mistake to pay cash for the PPOR

the fact they want to change it to an IP is whats causing the "problems" as such
if they wanted to buy an IP it would be fantastic but if you want to upgrade your PPOR then its a bad idea.
the only way to fix is as suggested sell or sell into a trust but you could also borrow that equity for deposits on other IP's until you have depleted it... that would fix it right?
 
Need a team for a spousal sale

Hiya

A spousal sale may work for you, since I believe in Vic there is no stamp duty payable.

A 105 % of value of property to a unit trust may also be worthwhile, BUT there is no easy or cheap fix.

The spousal sale option may work well for you

Any good broker can run through that option with

Thanks for all the replies. I really appreciate the effort of all you guys.

The spousal sale option sounds good but me and my wife both own the current property so it seems I should structure the loans as below:

Loan 1 - 50% of 330K (as my wife owns 50% of the property) - IO with offset account = $165K

Loan 2 - 80% of 550K - IO with offset account = $440K

This way I am the sole borrower of loan 1 and my wife gets the cash to pay the deposit and stamp duty for the new property.

As a result, the interests from Loan 1 will be tax deductible. Please correct me if I am wrong.

In addition, can you recommend an accountant, a broker and a solicitor in Melbourne who have experiences to handle spousal sales like ours? It seems I need a team now.

Again, thanks for any help you can give.

Cheers,
Kai
 
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Thanks for all the replies. I really appreciate the effort of all you guys.

The spousal sale option sounds good but me and my wife both own the current property so it seems I should structure the loans as below:

Loan 1 - 50% of 330K (as my wife owns 50% of the property) - IO with offset account = $165K

Loan 2 - 80% of 550K - IO with offset account = $440K

This way I am the sole borrower of loan 1 and my wife gets the cash to pay the deposit and stamp duty for the new property.

As a result, the interests from Loan 1 will be tax deductible. Please correct me if I am wrong.

In addition, can you recommend an accountant, a broker and a solicitor in Melbourne who have experiences to handle spousal sales like ours? It seems I need a team now.

Again, thanks for any help you can give.

Cheers,
Kai

Prob not that way.

It is not a matter of paying out half the loan but for selling half the property and for the purchasing spouse to borrow to buy this half of the property.
 
Hi Kai, you need to look at the numbers to see if they are worth all the hassle.

You can get your 50% = $165K + costs tax deductible by buying from your spouse. So then the property becomes an investment. The rent will go towards your income.

At 50% LVR, there'll be very negligible -ve gearing so tax deductible or not is moot.

Rent = $350 pw = $18200 p.a. less $4500 costs = $13700
Interest = $10320

Where is the tax advantage?

I really don't understand why you find it so hard to get the point.

KY
 
Hi Kai, you need to look at the numbers to see if they are worth all the hassle.

You can get your 50% = $165K + costs tax deductible by buying from your spouse. So then the property becomes an investment. The rent will go towards your income.

At 50% LVR, there'll be very negligible -ve gearing so tax deductible or not is moot.

Rent = $350 pw = $18200 p.a. less $4500 costs = $13700
Interest = $10320

Where is the tax advantage?

I really don't understand why you find it so hard to get the point.

KY

Hi KY,

According to the PM, the rent could be $310-$320 per week and I got some numbers from this link:

http://mybank.com.au/negative.asp

It seems there are still some tax saving benefits out there. The calculator showed it could save me $2600 on tax with the $165K loan. Without the deduction, I might need to pay $700 extra tax.

Are the numbers correct? I hope that online calculator is not misleading...:confused:  

Cheers,
Kai
 
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Hi, where does the 2600 tax saving come from? You buy from your wife so the income now is yours, not your wife's. To get 2600, you need to have -ve gearing of more than $10000 a year.

If your sole purpose is to save on tax, there are other ways to do it. Eg, if your wife doesn't work, you can give her some income.

Otherwise, you can contribute to Super to bring your taxable income down.

Have you considered buying $550K new property but for rental until you have made enough on it to make it into PPOR?

Borrow $550K + costs say $580K in total.
Your new house rents for $480 pw [estimate]
Your total loss including depreciation = $25000 p.a. You get about $7000 tax refund. Put this in the offset acct. Additionally, save 1K per month

After 3 years, you'll have accumulated about 60K

Sell current PPOR, say you net 300K, you will have your new PPOR with only 190K loan.

Why do you want to keep present PPOR for rental when you're going to be losing money on it?

KY
 
Hi folks,

am a nerbie here and still doing lots of reading. anyone mind to explain why paying cash for the first owner occupied property is a costly mistake?

thanks
 
Hi folks,

am a nerbie here and still doing lots of reading. anyone mind to explain why paying cash for the first owner occupied property is a costly mistake?

thanks

Its not a costly mistake, it can be a costly mistake.

If you purchase property cash, live in it all your life, invest elsewhere fine.

But if you purchase cash, move out, it becomes an investment property, you dont have any tax deduction for interest as you wont have a loan against it, you may need to borrow for next purchase of PPOR which obviously isnt tax deductable.
 
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