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Living in the investment property?

Discussion in 'Real Estate' started by ym567, 27th Sep, 2012.

  1. ym567

    ym567 New Member

    Joined:
    27th Sep, 2012
    Posts:
    1
    Location:
    Melbourne, VIC
    Dear forum-members,

    We (my wife and I) would be grateful to you, if anyone could provide a great solution to our scenario.

    We are living in a suburb (22 km South-West of Melbourne CBD). We have paid off the mortgage of the house we are living in at present.

    We bought a block of land in a neighbouring suburb, 1 year ago and now we are building an investment property on it. We're building it with Porter Davis. The way things are shaping up, the investment property is going to much better than the house we're living in at present.

    The problem is - if we move in to this new house and start living in it, we would have to pay off this big new mortgage of $550K, and we can't claim that interest on tax.

    And to make matters worse, if we give the house (we are living in at present) for rent, we can't do any negative gearing on that. And we have to declare extra income from this rental house.

    So, we are looking for a legitimate way of transferring the big mortgage of this investment property ($550K) to our existing house (we've been living in for 7 years - of which, the mortgage is paid off); So, that we can give it out for rent and we can take the benefit of negative gearing. And at the same time, the new property becomes mortgagge-free.

    Any suggestions / recommendations would be greatly appreciated.

    Thank you in advance.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    2 possible ways.

    1. Sell it and buy another.

    2. Have one spouse buy out the share of the other spouse and borrow to do so - for the first place. This will only allow you to claim a portion of the loan but can be done without stamp duty in Vic. Probably no CGT either.
     
  3. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    A variation on what Terryw suggests is to establish a unit trust, the unit trust purchases your existing PPOR using borrowed funds, you/wife buys units in the trust and then use the funds for the new PPOR.

    Stamp duty needs to be paid but no CGT.

    If you prefer to live in a better house, another option is to rent a new place to live in, convert your existing PPOR to an investment property (look at ownership and perhaps transfer ownership to lower tax payer - should be no stamp duty in Vic for this transfer). Overall after tax benefits could be considerable and you now have 2 IP's.

    Let us know what you decide to do.
    Greg
     
  4. realestate_basket

    realestate_basket Member

    Joined:
    11th May, 2010
    Posts:
    12
    Location:
    Sydney, Australia
    I know some one who was in the same situation and they decided to rent a nicer place to live in and make both properties IPs.
    Therefore, it's always recommended to put the surplus money in an offset account instead of paying off everything in the mortgage.
     
  5. Pete Ramoza

    Pete Ramoza Active Member

    Joined:
    29th Jul, 2012
    Posts:
    40
    Location:
    Brisbane, Qld
    Agree with Terry W
     
  6. jodie123

    jodie123 Active Member

    Joined:
    15th Aug, 2012
    Posts:
    34
    Location:
    Brisbane, Qld
    Agree with Pete Ramoza and GregR.

    It also constantly astounds me that there are so many clever peeps in this forum...:)
     
  7. geebers99

    geebers99 New Member

    Joined:
    31st Jan, 2013
    Posts:
    1
    Location:
    brisbane
    Stop thinking negative gearing its a social scam. look to building an investment structure that can purchase your properties!