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New family addition: turn the PPOR in IP?

Discussion in 'Real Estate' started by thingsareachanging, 1st May, 2013.

  1. Hi everyone,
    I am looking for some advice or recommendation on who to talk to.

    I am married and we have just had our first child. My wife will go back to work p/t next year, but won’t earn anything this year. Our PPOR is going to be too small so we want to upsize. The choices as we see it are to keep this house as an IP and move into another house (preferred) or sell up and buy another PPOR. We've had the current PPOR for 4 years (in my name) and the details:

    Loan amount: $480K (purchased for $605K)
    Amount in offset account: $365K (so ~$115K owing)
    Loan: variable rate currently at 5.51%
    Recent Valuation: $660K-$680K
    Estimated Rental Return: $510 p/week

    I have a HECS/HELP debt of around $20K and it’s growing with part time study. Other than that no debt and only other liquid assets are ~$25K in shares.

    Salary: $100K + super + $15K yearly at risk bonus.

    So with a dependent and a partner not earning can I keep the house and get another? or do i sell up and give up on the IP dream (for now)?

    Also, if I make repairs to the property eg. re-roof, with the intention of turning into a rental, is this cost tax deductible?

  2. Terryw

    Terryw Well-Known Member

    9th Jun, 2006
    On those figures it should be doable.

    Roof repair may be a capital expense so could be depreciated over x years, if the property is rented. If a genuine repair then it could be claimable upfront, but not if the property is not income producing.

    Glad to see you used an offset account and didn't pay down the loan. This saved you a lot of tax - or it will save you.
  3. GregR

    GregR Well-Known Member

    13th Jul, 2009
    Berwick Vic
    Do you have an estimate of the price you want to pay for a new home?
    Stamp duty concession applies if < $550k otherwise you will pay full stamp duty for anything over that.

    Broad numbers, say a $750k purchase plus stamp duty etc approx $42k = $792k needed. Using $365k offset, loan needed $427k.

    Borrowing capacity based on what you have provided, max around $500k odd depending on lender so you should be able to arrange finance for this.

    Let me know if you need anything further or assistance.
    Good luck with it and I agree with Terry, well done on the use of the offset.

    Also agree with Terry, get the roof repair done after it is rented (could be before they move in perhaps).