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Converting PPOR to Investment

Discussion in 'Real Estate' started by Elisha, 26th Mar, 2009.

  1. Elisha

    Elisha New Member

    26th Mar, 2009
    Brisbane Qld
    Hi all - first post virgin!

    I need some advice desperately...

    Situation is that my husband and I have our home - PPOR worth 750K. We owe $370K.

    We have found a property to buy for $560K that we would like to make our PPOR and rent out our existing property - thus making it our investment.

    Obviously for tax purposes we would like to take all the equity out of our current PPOR and put it on the new PPOR.

    How can we go about this in order to get the greatest tax advantage?

    Thanks very much - any help and advice would be greatly appreciated

  2. islandgirl

    islandgirl Well-Known Member

    18th Sep, 2006
    Middle of beautiful Moreton Bay, Qld
    Hi Elisha

    Here is the sitation in regard to tax purposes

    1. You cannot refinance your existing property to its full value and take out the equity to use on your new PPOR. The Tax Office will say you are using the fiance to fund your PPOR (which you are) and therefore cannot claim it as a tax deduction.

    2. You can however claim the interest on the existing $370K outstanding as this is the original loan on the property

    3. If you have money in an offset account, you can safety take this money and put on your new property.

    If you buy a PPOR with the intention of one day scaling up and converting the property to an IP you should always setup the finance as interest only with a full offset account. That way when you move you can transfer the whole amount out of the offset and leave the original loan, which is now fully deductable. Hindsight is a wonderful thing. Falls into the section of things I wish I knew earlier!
    Last edited by a moderator: 26th Mar, 2009
  3. bazza52

    bazza52 Member

    4th Dec, 2006
    Hi Elisha

    First question is - if you were out shopping for an investment property and had $750k to spend, would you buy your place, or something else (even 2 smaller ones for $375k)? What situation would give you the best capital growth / cashflow / etc?

    We also had this dilemma recently and decided to sell our PPOR, buy a new PPOR and invest in a higher capital growth area.
  4. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW
    That's what I'd do.
    Your PPOR equity is significant so IMO if the conditions are right in your area you should consider selling and start fresh with a new PPOR loan and an offset account.
    Having a big PPOR loan doesn't make sense.
    If you need to have investment properties you can still gear against your new PPOR and buy them.