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Investment property

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That tax deduction surely is, the rent we would paying ; aka the "dead money" is far less than the rent we would be making on the house we would be buying, at least that's the theory here!

I'm just throwing around ideas here, as I said - I had an idea, wanted to suss out the legal stance. This isn't necessarily what we're going to do, we may just live in the house

Convenience isn't really an issue at the moment; neither of us work in the city at the moment (may change very soon, though)

Many people rent whilst saving up for a house, it may be 'dead money', but at least they aren't amassing a ton of interest. Not all areas are increasing 15% a year, despite what many think there isn't need for a huge rush to get into the housing market.
- So, I don't see how this is any different from that logic?
 

The CGT that Penny is alluding too is if/when you come to sell the house. Obviously if you ever sell the house the period it was rented for is calculated as an investment an CGT will be payable.
It is therefore imperative that you get valuations when you move out and when you move back in.

Further to Penny's statement - if moving interstate for work is an option than the CGT free window is 8 years from memory.

The most crucial thing to weigh up in my opinion is the devaluing effect on your property that >5 years of renters will have on it.
Secondly you would want to tie up a long lease for yourselves as you could well face being forced to move every year or two due to house sales etc.

Are you able to put your parents/in-laws in the property and move into their house perhaps? (pay rent to yourselves)
 

Important info.

I doubt you'll positively gear a property these days in most capital cities.
So you'll need to fund both the shortfall in rent---Your own Rent and possibly a few more Interest rates rises. Unless you pay a premium initially for a fixed term.

The most crucial thing to weigh up in my opinion is the devaluing effect on your property that >5 years of renters will have on it.
Click to expand...

Can be substantial.Last one I sold devalued $30K from a pristine similar home in the area.

One possible solution (depending on your circumstances) and careful selection of what you buy is to rent out rooms and have the best of both worlds.

Friend bought a close to the airport nice pad and he and his Girlfriend (She was a hostee) rented rooms to Airline Hostee on switch runs.At $60/ night (In Adelaide) did really well.
Even better I would imagine in pretty well all other capital cities.
 

Fair idea there Tech, although the idea of a "roomie" doesn't exactly overly appeal to me!

I'm absolutely clueless on real estate, so to clarify a few things - is there a CGT on selling a residential property? If so, is loan interest added to the base cost or no? As obviously I'd be "paying" more to the bank than I paid for the actual property.

One thing is for sure, the housing market is fairly tough these days for a newbie Perhaps we should wait for a few more hikes, & reap the benefits of multiple foreclosures Has the Aus market been hit really at all? I know areas in the US have dropped 15%.

Heck, might even be worthwhile buying a cheap property for the time being
 
Yes. Capital Gains Tax on sale would not apply as you would qualify for the main residence exemption using the 6 year rule. If you do not establish it initially as your main residence however then apportionment would apply and you would pay partial CGT.

DYOR
 
Sounds good. here is my situation. I just paid off a modest unit in a city. Can I use this place as a deposit to buy a investment property?
 


I have read the ozinvest website and they too seem to be adament about it being right that you can get an investment post 2000 not live in it and get the fhog... This contradicts everything I have been told by OSR.
I will make some further enquiries in the new year when OSR re opens as this is quite an important ruling..

I am 90% sure that I am still correct (NSW) (Tasmania may be different) however am ready to be humbled and proved wrong by OSR. I cant see anything on the OSR website that mentions you can own an investment prior..

What I am thinking could be possible is that the Federal gov provides the $7k and state gov wipes stamp duty.. state gov maybe wont do this if you own an investment ...

OSR web site says

To qualify for First Home Plus you must meet the criteria listed below:

the contract and the transfer must be for the purchase of the whole of the property

all purchasers must be ‘eligible purchasers’

at least one eligible purchaser must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months of completion of the agreement

an ‘eligible purchaser’ is a natural person (ie not a company or trust) at least 18 years of age who has not, and whose spouse/de facto has not:

at any time owned (either solely or with some one else) residential property in Australia other than property owned solely as trustee or executor

previously received an exemption or concession under First Home Plus.


The only way reading this that I can see it would be possible to have the fhog after owning an investment is if the investment was bought in a trust or company..

Under First Home Plus and First Home Plus One, if you are buying an existing home:

at least one of the eligible purchasers must occupy the property as their principal place of residence for a continuous period of at least six months, with that occupation starting within 12 months after completion of the agreement or transfer.

Residency is six months (thats it!) see above from OSR website. Six months within first 12 months meets all requirements for residency.

Note I am talking about NSW .. other states may differ ..
 
Flying Fish said:
Sounds good. here is my situation. I just paid off a modest unit in a city. Can I use this place as a deposit to buy a investment property?
Click to expand...

Well done for paying it off!

You can however you want it so that there is still as much equity in your home as possible and as minimum in the investment property (ideally great equity in both but one amount split between to max the occupied property) as everything on the investment is tax deductable.
 
Flying Fish said:
Sounds good. here is my situation. I just paid off a modest unit in a city. Can I use this place as a deposit to buy a investment property?
Click to expand...
Just make sure the loan is on the investment property, with your ppr as collateral only. Sometimes they refinance both properties, then it is difficult to differentiate for tax purposes.
Another thing worth asking, is at what point will you be able to remove the caveat on your unit, then the investment property becomes a stand alone loan.
Which allows you to use the unit, as collateral for a further purchase, if you wish to.

Just my thoughts, but it is essential you set everything up correctly, the ATO aren't very forgiving.
One of the accountants on the forum, may be able to give you a more accurate description of the proceedure.
 
What about if you have no intention of having kids? In that situation, is it worth buying an investment property, or do you think that when you reach retirement age there will be no real need for all that extra passive income, because you're too lonely and depressed to enjoy it?
 
CGT is tax on the Capital appreciation of the property from Purchase to the futures sales price
buy at 1 million sell at 1.5 million CGT on $500 k

get it!
 
tech/a said:
CGT is tax on the Capital appreciation of the property from Purchase to the futures sales price
buy at 1 million sell at 1.5 million CGT on $500 k

get it!
Click to expand...
Mostly correct.

CGT is the tax on the difference between your “Cost Base” and your final sales price, your “Cost Base” begins at your purchase price, but will rise when you make capital investments into the property and fall as you claim depreciation.

for example, if you purchase the property for $1M, but over 10 years you claim $100k as depreciation charges as the building wears out, it will reduce your cost base by $100k.

which means you will pay capital gains tax of the difference between $900k and the sales price of $1.5 eg capital gain of $600k.

the reverse is true if you spend $100k improving the property, it will increase your cost base.
 

You will need the passive income to fund all the travel and other perks you get to enjoy as a childless couple.
 
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