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anyone turned PPOR to neg geared IP? experiences?

Discussion in 'General Property Chat' started by mgmgrand, 22nd May, 2016.

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  1. mgmgrand

    mgmgrand Member

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    Has anyone here turned their PPOR into an IP?

    has anyone negatively geared it??

    surprised more don't do this

    what are peoples experiences

    we are hoping to buy a nice house and rent cheaper in another place after a few weeks, to save tax
     
  2. joel

    joel Well-Known Member

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    Your plan is to lose money. You will own a nice house but you wont get to enjoy it. Wheres the benefit?
     
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  3. mgmgrand

    mgmgrand Member

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    the point is to maximise my loan for the first 2 years in my name, deduct all interest and expenses in my name, giving us an extra 65K per year compared to if we lived in it

    thats if we rent a 500/week property

    our property that we will buy could rent for 1000/week

    then move in after 2 years with the loan paid off mostly

    our big deposit will go with the wife, who will get interest on the money, and pay hardly any tax as she is on maternity leave

    unfortunately our crap tax system encourages this behaviour
     
  4. Joynz

    Joynz Well-Known Member

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    Does that mean you would get the mortgage at the POPR interest rate and pay stamp duty at the lower rate For a POPR (if in Vic anyway) then move to a rental, but keep the lower interest rate?

    Once it's an IP would you need to move to a higher interest rate?
     
  5. mgmgrand

    mgmgrand Member

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    i would move into my new place, then after a few weeks organise a cheaper rental somewhere closer to work
     
  6. thatbum

    thatbum Well-Known Member

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    You posted the exact same thing on whirlpool earlier today. I'm not sure you understand the point of negative gearing.

    You should just cut the PPOR part of the plan out and it becomes better - rent to save money.
     
  7. mgmgrand

    mgmgrand Member

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    ppor is important for our future..it is cgt free due to the 6 year rule
     
  8. Dmarkw

    Dmarkw Well-Known Member

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    I can't see how this adds up. Your rent savings are ~25k pa. Interest on deposit probably not much more than $2k for each $100k you have. With negative gearing, you're losing 100% to save a maximum 45% in tax (if top tax bracket). Only makes sense to NG if in dollar terms yr capital gains exceed the amount you are actually losing each year..
     
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  9. mgmgrand

    mgmgrand Member

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    my wife would have several hundred thou and is on maternity leave...she will pay bugger all tax

    the loan will be in my name

    i have massive bonuses coming up this year...i can deduct all up 70k/year

    thats how it would work
     
  10. Dmarkw

    Dmarkw Well-Known Member

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    Also look at the opportunity cost of not investing in an asset with better yeild and potentially better capital gains; and also renting a prime property with a low yeild (I.e that someone else is negatively gearing and losing money). Again comes down to whether you think yr negatively geared property will outperform in capital growth, and including the PPOR discount.
     
  11. mgmgrand

    mgmgrand Member

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    sure..points taken

    we will baiscally move in in 2 years with this strategy in to our own place with no mortgage...and work part time

    we will also pay minimal tax whereas if we move into our dream house straight away we can only pay off 90k a year as opposed to 155k a year if we do the original strategy

    we still own the place...its just a different structure
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I think it is generally better, from a tax point of view, to rent out your main residence, and to rent a similar property, especially in the early years. This is because most properties will be negatively geared and this will result in tax savings - without losing the CGT exemption. After a few years this loss decreases significantly and you can move back into your main residence.

    See
    Strategy: Rent where you live and Buy Investment Properties
     
  13. mgmgrand

    mgmgrand Member

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    thks terry

    good to know i am on the right track

    what time frame would be appropriate to move out...a month???? will get all documents proving it was my ppor before i move....

    surprised more dont do this

    we are saving 65k a year after tax, and will be mortgage free in 2.5 yrs
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No min time needed. It just has to be your main resdience and you should keep evidence to prove this if challenged.
     
  15. mgmgrand

    mgmgrand Member

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    cheers terry

    this makes sense for our family...we have hundreds of thou to give the wife, she will work 2 days a week on maternity leave...so her wages and interest will be largely tax free

    since i will own the loan, and the ppor, the interest will be all mine

    wll have to structure it correctly...
    \

    it will mean mortgage free in 2.5 yrs
     
  16. Miss_D

    Miss_D Active Member

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    If youhave only just bought the property a lot of states offer cheaper stamp duty on ppor then for ip properties. You may be up for more stamp duty if you move out within a certain period... I know qld is 12 months you must live in ppor for the stamp duty excemption.
     
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  17. mgmgrand

    mgmgrand Member

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    miss d

    why would we be up for more stamp duty?? it will forever be my ppor....nothing will change, other than i will rent it out
     
  18. Joynz

    Joynz Well-Known Member

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    What state are you in?

    Stamp duty and interest are usually higher for an investment property.
     
  19. mgmgrand

    mgmgrand Member

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    in qld

    it wont be an IP initially....it will be my ppor and it will forever be my ppor....i just happen to rent it out as i want to be closer to work
     
  20. Miss_D

    Miss_D Active Member

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