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Convert my PPR into rental investment property

Discussion in 'Real Estate' started by rumoid, 6th Apr, 2015.

  1. rumoid

    rumoid Member

    Joined:
    6th Sep, 2007
    Posts:
    18
    Location:
    nsw
    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
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    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
     
  3. rumoid

    rumoid Member

    Joined:
    6th Sep, 2007
    Posts:
    18
    Location:
    nsw
    Thanks Terry

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

    Cheers
     
  4. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Interest would only be deductible for loans if the borrowed money is used for investment or business purposes.