Why live in a PPOR?

hey guys

I'm wanting check if my thinking is sound


CURRNT POSITION
---------------
-28 year old
-just about to move out of home
-IP1 just paid off --> equity at least $280,000
-IP1 bringing in $270 ($1,100 net per month)
-wage $82,000 ($4,400 net per month)
-business income $700 net per month



OPTION 1
--------
-buy a PPOR (principle place of residence) that i need to pay off for around $300,000 (unit)
-live in PPOR
-rent inflow from IP1 + wage + business goes towards paying off PPOR loan (NOT tax deductible)



OPTION 2
--------
-buy IP2
-rent out IP2
-move out and rent a place in a trendy suburb ($270-$300 per week)
-rent inflows from IP1 + IP2 + wage + business goes in an offset account to service the IP2 loan (FULLY tax deductible)
-take out the minimum amount for living expenses which includes the outgoing rent i'd be paying someone else for a roof over my head



OPTION 3
--------
your suggestions...




option 2 sounds good to me!

to put it out there - do professional investors live a PPOR that they need to pay off or do they prefer to rent(pay someone else) in order to always have their loan tax deductible

obviously living in your own PPOR has benefits such not being at risk of being evicted and told to move but aside form that am i missing something?

would like to hear your thoughts


cheers
 
Renting is always a better financial decision, strictly speaking. You pay less than if you were actually buying, so you can borrow more money and grow your portfolio faster. But it's only better if you are are a good saver and invest your saved-money from renting wisely. Other than that, you got it right. Just bear in mind that with a PPOR even though the debt is not deductible, if you do sell it you pay no CGT.
 
Could you just live in your IP and make it your PPOR and then buy another IP so that all your debt would be tax deductable?
 
Could you just live in your IP and make it your PPOR and then buy another IP so that all your debt would be tax deductable?

agreed IP1 is just about paid off meaning no tax deductions on the interest anyway
although still deductions available

also depending how long you have had IP1 (still classified as PPOR for 6 year) you may still be CGT free as you can rent your PPOR for up to 6 years? if you dont own another IP and wont have to pay CGT

maybe you move into IP1 turning it into PPOR and buy IP2
get a valuation done on IP1 (PPOR) if you choose to rent elsewhere and rent out IP1 again saving valuable $$ of possible CGT
 
agreed IP1 is just about paid off meaning no tax deductions on the interest anyway
although still deductions available

also depending how long you have had IP1 (still classified as PPOR for 6 year) you may still be CGT free as you can rent your PPOR for up to 6 years? if you dont own another IP and wont have to pay CGT
Only if it was lived in (was PPOR) prior to renting. And what does having another IP have to do with the CGT implications? :confused:
maybe you move into IP1 turning it into PPOR and buy IP2
get a valuation done on IP1 (PPOR) if you choose to rent elsewhere and rent out IP1 again saving valuable $$ of possible CGT

Now THIS could be a good idea. Although the idea of getting vals and the CGT comments don't seem to compute.
 
Thanks guys for your responses - i also just chatted to my accountant and option 2 appears to be sound.

I guess for the benefit of others that may be starting out ---> purchase an IP and put a tenant in. the rent that they pay could go directly to the rent bill you have to pay someone else for a roof over your head. the benefit to you is that the loan/mortgage interest that you need to pay the bank is fully tax deductible

Cheers
 
Only if it was lived in (was PPOR) prior to renting. And what does having another IP have to do with the CGT implications? :confused:
ah ok im still unclear how that rules works...
i was under the impression you could rent out your PPOR for up to 6 years without having to pay any CGT but you could only do that if you didnt own another house.. im guessing that bits wrong?

where can i find more info about rules like that...?

Now THIS could be a good idea. Although the idea of getting vals and the CGT comments don't seem to compute.

yeah since it started out as an IP it wouldnt work... i think i was in dream land lol
 
After buying a $300,000 and although I believe I got a good price for it and interest rates are currently really low it would be cheaper to rent. If I need a bigger unit I will choose to rent in the future and just turn my current property into an investment. So I'd recommend to buy and investment and just rent. You hear a lot of people say that it is a way of forced savings/investing but I see you would be better off to continue to rent and buy an investment property instead of buying a ppor.
 
hey guys

I'm wanting check if my thinking is sound....would like to hear your thoughts


Righto then. No, your thinking is not sound.....you have a major fundamental flaw that needs immediate attention. You're trying to build a skyscraper with no foundation. What's the flaw ??

CURRENT POSITION
---------------
-28 year old
-just about to move out of home


You're 28 y.o. and still living with Mummy & Daddy !!! In my book you've overstayed your welcome by a decade. Forget the numbers, this trumps everything.



-IP1 just paid off
-wage $82,000


So, you're a 28 y.o. fully grown man with a fully paid off property earning a great wage and you're still living at home with Mummy & Daddy.....

Turn it up. You don't need financial advice from your accountant. You need a great big pair scissors to cut those apron strings...they are choking you.



OPTION 3
--------
your suggestions...


Instantly move out of Mummy & Daddy's hotel, apologise for leaching off them for 10 years too long, send them on a long holiday at your expense as a tiny token of appreciation for what they have done for you over the last 10 years whilst you've been a semi-adult....move into your own property and get on with life.


Jesus, these Gen X parents have a lot to answer for....they are raising a bunch of wet handbags. Come on BigV, grow a pair and stand on your own two feet for the first time in your life....see how it feels. I've got visions of a baby giraffe taking it's first wobbly steps.


Forget property, financial and tax suggestions....that's minor stuff. You need to ask some harder life questions and get it sorted.
 
Oh Dazz - you're a tough nut :D (p.s. I moved out at 19 - mortgage at 21)

As for your plan ... work out where you want to be in the future financially/investmently and then plot back how you will get there.

There is no set receipe ... what works for you, works for you.

We personally always have a PPOR that we live in - only because we buy ones that need a little something done to them - do the something over a few years - sell - take after expenses/interest profit tax free - repeat.

This process makes me more in-the-pocket money than a full time job would and means I can be a stay-at-home renovating mum.

In the meantime we buy neutrally geared, maintenance free units.
 
We personally always have a PPOR that we live in - only because we buy ones that need a little something done to them - do the something over a few years - sell - take after expenses/interest profit tax free - repeat.

This process makes me more in-the-pocket money than a full time job would and means I can be a stay-at-home renovating mum.

In the meantime we buy neutrally geared, maintenance free units.

Lizzie, good plan and glad it works for you.

I must assume that the PPOR's that you buy need a bit more than a "little something done" to make you money out of it. After all, the costs to buy and sell (tens of thousands) these days, especially every few years, takes a nice slice of the cake, if not the whole thing.
 
Righto then. No, your thinking is not sound.....you have a major fundamental flaw that needs immediate attention. You're trying to build a skyscraper with no foundation. What's the flaw ??

You're 28 y.o. and still living with Mummy & Daddy !!! In my book you've overstayed your welcome by a decade. Forget the numbers, this trumps everything.

Always straight to the point :D
 
At least he has invested whilst living at home. There would be plenty of 28 year olds still living with mum and dad, who have no savings or investments at all.
 
Doing well, why move out now?

Going back to the original question, your PPOR will be the only major CGT free asset that you will probably own. So not utilising one of your properties as a main residence will be a waste. At least move into one of them and establish it as your main residence. You could then move out a again and keep it CGT free for 6 years while you rent it.
 
Ideally you would live in the one paid off - otherwise you will be paying non deductible interest. But this may not suit.
 
I'll reply to the OP without reading all the replies.

There is absolutely no reason to live in a PPOR while you are single and looking for advancement in your career. Don't collect unnecessary baggage, travel light.

Plan for yourself and let the tax look after itself.
 
OPTION 2
--------
-buy IP2
-rent out IP2
-move out and rent a place in a trendy suburb ($270-$300 per week)-rent inflows from IP1 + IP2 + wage + business goes in an offset account to service the IP2 loan (FULLY tax deductible)
-take out the minimum amount for living expenses which includes the outgoing rent i'd be paying someone else for a roof over my head

Man, you sure don't live in Perth do you...
 
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