We rent their PPOR, they rent our PPOR?
- Thread starter younginvestors
- Start date
I know two people who do this ( they are actually romantically involved) and they even claim rent assistance! - I think this makes it more worthwhile than the tax deductions as they are not high income earners.
It is legal and it works for them.
It is legal and it works for them.
Surely they cannot claim rent assistance if they own a property 
I have read that it is illegal to rent of each other and claim the loss as a deduction which really just makes sense. But in saying that I do know 2 brothers who built a pair of duplexes and rented of each other for years without getting into trouble.
I have always wondered about doing a three way deal so that you are not renting from the person who you are renting to.
I have read that it is illegal to rent of each other and claim the loss as a deduction which really just makes sense. But in saying that I do know 2 brothers who built a pair of duplexes and rented of each other for years without getting into trouble.
I have always wondered about doing a three way deal so that you are not renting from the person who you are renting to.
Of course it is legal. You are allowed to live wherever you like. Whether you can obtain any tax advantages is quite another matter.
Like many things, it sounds good in theory, but in practice life is a bit messy....
What happens if you need to move?
What happens if they need to move?
What happens if the bread winner of the other family loses their job?
What if you want to add a garden shed, or replace a fence, and the other family can't afford/don't want to do it?
What happens if you need to move?
What happens if they need to move?
What happens if the bread winner of the other family loses their job?
What if you want to add a garden shed, or replace a fence, and the other family can't afford/don't want to do it?
If you were going to do this, why would you not both self-manage? Given there would be a level of trust in this arrangement, you would keep an additional ~7%+.
Interesting concept though. The real issue to me would be the proximity (not physical) you would have with the owner (ie your friends), especially on maintenance issues (and vice-versa). People change over time, so to their expectations.
Valid questions, they jus need to be considered.. but there are thigns to consifer in everythign we do, none of these questions appear to be showstoppers shoudl eveyrthing else be sound
renting friends house
There was a story in API a while back covering this exact scenario.
Two couples wanted to buy off the plan units in a new development but couldn't get finance as they were stretching their finances a bit too far.
The developers sales agent came up with the idea of them buying the properties as rentals and renting off each other.
When they took this to their bank/broker then got the loan as the rental income got them over the line with their ability to repay the loan according to the bank.
It is completely legal and in this case it actually helped two couples to buy a property they otherwise couldn't afford.
Smart work from the sales agent too in achieving two sales that otherwise would have fallen through due to an inability to obtain finance.
There was a story in API a while back covering this exact scenario.
Two couples wanted to buy off the plan units in a new development but couldn't get finance as they were stretching their finances a bit too far.
The developers sales agent came up with the idea of them buying the properties as rentals and renting off each other.
When they took this to their bank/broker then got the loan as the rental income got them over the line with their ability to repay the loan according to the bank.
It is completely legal and in this case it actually helped two couples to buy a property they otherwise couldn't afford.
Smart work from the sales agent too in achieving two sales that otherwise would have fallen through due to an inability to obtain finance.
Eventually the nesting instinct takes over, unfortunately. Though given the current rental market (and judging by some of the emails I've been getting from my tenants complaining about rent rises), I'm really glad I bought my PPOR last year. Of course, I'm even MORE glad I bought those IPs prior to buying my PPOR.
Alex
I'm getting them via my PM. The tenant sent a detailed email to the PM and she forwarded it to me to discuss.
Alex
I thought TR 2002/18 pretty much disallowed interest deductions for renting your PPoR from a trust.
GP
The big issue here is capital gains tax exmption. It was mentioned briefly but not spelt out.
If you own a place you live in, abd sell, any profit you make is tax free.
If you own a place you don't live in, and sell, any profit is taxable (capital gains tax).
If you have invested properly, any capital gains will far exceed any losses made along the way. That's the big thing about investing in property.
So by renting to each other you can have tax advantages in the short term, but potentially much bigger disadvantages when you sell.
If you own a place you live in, abd sell, any profit you make is tax free.
If you own a place you don't live in, and sell, any profit is taxable (capital gains tax).
If you have invested properly, any capital gains will far exceed any losses made along the way. That's the big thing about investing in property.
So by renting to each other you can have tax advantages in the short term, but potentially much bigger disadvantages when you sell.
I hear ya brother. Then swap it with someone else and let the tax man pay for it.
Was randomly searching on the forum and came across with this thread.
Hi YongI,
I can see why this will be beneficiary to many.
How did you go with this? did you find the legit answer?
What if you swap back before you decide to sell...? So say you did the swap. 6 years later you "move" back to your respective houses? I'm thinking about this between family members... All with the same idea
The problem is finding sufficient people who want to swap. Looked into it and there simply isn't enough demand. Swapping market is just too niche and for holiday makers really.
Too many people stuck in the old ways.. own, own, own... instead of rent, rent, rent. I suppose thats why property prices in Aust keeps on going up. Living the dream - buy your own home no matter how skewed the rent vs buy pay off is.
