Convert my PPR into rental investment property

Hi all

We have been getting a few quotes for extending our current PPR but build prices are much higher than we would like so now thinking about renting out this property and then buying or renting elsewhere.

Unfortunately we dont have any funds for an additional loan deposit so we would have to use the equity in our current PPR

Rough figures are as follows

Current house value $750-800K
Current mortgage $452K
Current rental possible $2K per month

House we would like $900K + stamp duty $49K

Is it possible to covert PPR to rental easily enough and how would you guys suggest I do this?
Would I get funding to buy the 2nd property?--- current mortgage advisor said that I could stretch to +$250K borrowing on the existing house based on existing assets/liabilities/wages etc)
What are the pitfalls etc

Any advice is most welcome

Thanks

 

To make a property a rental you simply rent it out. Any interest associated with loans used for the purchase of that property would be deductible.

To get the deposit for the new home you would borrow extra against the current home, under a new split, and use this as deposit. Interest on this loan will not be deductible.

The new home would secure a new loan up to say 80% with the rest coming from the new split.

you have to ask you broker could you service total loans of about $1.5mil assuming you get rental income of $XX per week from the current property

 

Thanks Terry

Is there no way of raising the deposit on the existing locked in equity and making the interest deductible?

Cheers

 

Interest would only be deductible for loans if the borrowed money is used for investment or business purposes.