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Bought a house - rent it or live in it

Discussion in 'Real Estate' started by tc123, 3rd Nov, 2013.

  1. tc123

    tc123 Tom

    Joined:
    4th Nov, 2011
    Posts:
    40
    Location:
    Australia
    Bought a 2nd house - rent it? or move in to it?

    Hi all

    Just bought a second house this week, with settlement in 30 days!

    The original plan was to move in to house #2 and rent out house #1.

    My questions/thoughts:
    If we instead stay in house 1 and rent out house 2.. We will get more weekly rent for house 2 as it is 3 bedroom and a lot bigger (same suburb).

    House 2 needs a few things:
    A dishwasher installed, new deck, paint inside, rip up carpet, polish floorboards, new curtains..
    Could I claim all/some of these things as tax deductions while it is rented?

    House 1, as we have been living in it, has nothing left to do on it.

    A rough calculation would suggest that we would be around $70 a week better off by staying in house 1 and renting house 2 (just by going on loan repayments and rental income) obviously there are expenses associated with it too.

    The main reason of wanting to live in house 2 is because it's bigger and a new project for us! However, if it makes more sense to rent it out for a year or so, perhaps that is a better approach first?
     
    Last edited by a moderator: 3rd Nov, 2013
  2. tc123

    tc123 Tom

    Joined:
    4th Nov, 2011
    Posts:
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    Location:
    Australia
    House 2

    So basically house 2 is an expensive investment property (purchase price ~$700k) until we decide to move into it.

    We can afford to service the loan either way..

    Thoughts/advice appreciated. Thankyou
     
  3. Snoop

    Snoop New Member

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    26th Oct, 2013
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    Location:
    Sydney, NSW
    Rent it out

    Hi,
    It sounds as if you are managing very well financially and the negative gearing is not breaking the bank.

    I would rent out house No 2, and fix/replace/paint as much as you can while renting it out, as everything you spend in a property that you rent out can be factored into your tax deduction claim at the end of the financial year.

    Make sure you have a list of depreciation done by a qualified company - they will list all the depreciable items: building and contents, then your accountant would look at how much you can claim year by year. It's really worthwhile doing this.

    Cheers
     
  4. GregR

    GregR Reid Consultants

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    13th Jul, 2009
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    Location:
    Berwick Vic
    Tom,
    You need to take care on #2 re initial repairs, replacements, improvements etc. These could be regarded as a capital expense rather than a repair and maintenance issue which some of these type of costs could be after the IP has been rented for a period.

    Without knowing or seeing numbers, I cannot comment as to which is a better financial option. It sounds as if you purchased #2 with a view to live in, so unless you have a compelling reason not to, why wouldn't you?

    Greg
     
  5. Terryw

    Terryw Well-Known Member

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    Consider the CGT aspects as well. IP2 will never be totally CGT free.
     
  6. tc123

    tc123 Tom

    Joined:
    4th Nov, 2011
    Posts:
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    Location:
    Australia
    Thanks for the responses all!

    Have decided to move into House 2 and rent House 1.. Will see how it goes for the next couple of years/tax returns :)
     
  7. tc123

    tc123 Tom

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    Location:
    Australia
    RE: CGT - its always hard to decide which one will be better kept as our PPOR, as we will be able to claim House 1 as our PPOR for the next 6 years, whilst living in House 2. However, during this time, House 2 would be subject to CGT for the years that it is not a PPOR.. How do people go about deciding which one to make PPOR?
     
  8. Terryw

    Terryw Well-Known Member

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    The decision only has to be made in the year of the sale, depending on a few things...
     
  9. Blueeye

    Blueeye Active Member

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    Sounds like you're comfortable with your decision. Also sounds like you purchased #2 with the intention of living in it so good to see that you've backed yourself.
     
  10. tc123

    tc123 Tom

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    - All sorted now. Living in #2. Revalued, bought wife's share, refinanced #1 and rented it out. All going well. Cheers
     
  11. Pete Ramoza

    Pete Ramoza Active Member

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    29th Jul, 2012
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    Location:
    Brisbane, Qld
    Great! Thanks for keeping us updated!
     
  12. Terryw

    Terryw Well-Known Member

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    How did you buy your wife's share?