A question for the wise......

After some advice please.....

Have just spent the weekend away looking at new ppors in a more rural location, its time for a tree change.
We looked at a heap of places in our desired town (have checked flood zones and nbn options), and both pass the grade for what we need.

One place has really taken our fancy. 3 units on one block. One we would live in (3brm), one we would use as an Airbnb, and someplace for family to stay when they come to visit (2brm). The last we would lease full time to a tenant (possibly existing), also 2brm.
All on one title (separate rates apparently).

How would CGT work when we sell later on?
Are you still able to claim deductions etc on the long term and short term rentals?

Is there something I'm missing that would make this a great buy/idea, or the worst one I've had yet?

We have several rentals already, would sell our ppor to pay for this, (but would it be smart to have part mortgage and is it claimable? This is where I get totally confused.
Does anyone know, or is there something I'm missing?
Thanks in advance

 

I don't know but sounds like an excellent plan to me, especially if it's a place people like to visit.

 

You forfeit your CGT exemption from the sounds.

My advice would always have your home as your home, with enough room for non paying visitors, have your investments and business elsewhere.

 

Have you considered renting in the new location prior to buying? Just in case it isn’t what you expected.

Might be worthwhile considering renting out your current ppor - renting a place in the new location and giving it 6 months or so before committing. If you love it - then buy a new place if it doesn’t work out - move back

How long have the units been on the market? If it’s been a while then there might not be a huge rush to purchase them.

Cheers

Jamie

 

Considering we are looking at downsizing, moving back isn't really an option, not that I think I would even consider it. I'm a bit of a frequent mover, this is a record for me at 11yrs in the one spot, and I have been planting the seeds to move away for a few years now. Its just now, technology is finally catching up to areas that weren't in our range in the past. We are both looking at getting back to our rural roots and away from the hussle and bussle of city living. Mind you, we are only looking at 3hrs away, so still totally accessable for any needs/wants.
I haven't rented a property in over 20yrs, just keep buying when I have wanted to move, so it hadn't really crossed my mind. Not to mention its not a necessity.
The plan was to buy at least 2 places in the area anyway. One to live in and one to use for family/Airbnb (currently only 2 Airbnb properties in the area).
I don't really want another big house, for just those times family come to visit. And thought 3 on one large block would be ideal for what we are looking for, especially with the family being able to be so close.

 

welcome to PC @Mardi McKenzie

reading your posts, I feel you are keen to sell the current PPOR, and buy the 3 in one title block. renting part of PPOR out could have and impact on your PPOR CGT exemption when you sell it ( not an accountant here, it is my understanding)

 

Yes, that's the gist of it. Though I don't expect the properties to go up a great amount in value over the decade or so we will own them, so not sure that CGT should be a major concern.
What I am trying to understand is do I keep a mortgage over the property and am I able to claim deductions for improvements to the units? I will be trying to talk to my accountant soon so I can get my head around all this. I just thought I would ask those that may have some experience in this area, for some feedback/advice. Just greatful for any advice I can get.

 

If you are a frequent mover it may well be cheaper for you to become a tenant. The rent may turn out to be lower than the transaction costs of getting into and out of property ownership (stamp duty, selling agent fees, legal fees, building and pest fees etc)

 

So is it on one title? I have seen a few of these properties that way, so essentially you could do a PPOR loan (better rate possibly)
as this is technically true,
Yes you have the possibility of getting income from the property but its your PPOR.
now in relation to

-CGT; If its one title you may not have to pay, if its multi titled you will have to pay minimum 2/3 titles and may get the PPOR CGT free.

Are you still able to claim deductions etc on the long term and short term rentals? Yes, speak with accountant for accounting advice

Is there something I'm missing that would make this a great buy/idea, or the worst one I've had yet? There are so many other potential things but you can cover most by due diligence and insurances and adding value to purchase (if possible)

We have several rentals already, would sell our ppor to pay for this, (but would it be smart to have part mortgage and is it claimable? This is where I get totally confused. please explain? dont exactly get what your asking?

 

Since the property is income producing it couldn’t be exempt from CGT. But you may get a partial CGT exemption for the part you are living in.


Deductions as per normal, but you would need to apportion any cost that relates to the whole property – such as rates.


Yes there are heaps of other things you would need to consider.


If you borrow to buy such a place only part of the interest would be deductible.


An alternative may be not to live in it, borrow 105% to buy it and to live elsewhere with no or little loan and get the full main residence CGT exemption.