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Converting IP to PPOR

Discussion in 'Legal Issues' started by Sonamic, 16th Aug, 2015.

  1. Sonamic

    Sonamic Well-Known Member

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    Say you decide to build an IP with the intention of eventually living in it -
    1. What length of time will the property need to be rented for before can make it your PPOR?
    2. What are the financial and legal ramifications?
    Current PPOR would then become IP.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1 hour.
    CGT, Deductibility of interest for starters.
     
  3. Rixter

    Rixter Well-Known Member

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    Terry, for someone wanting to rent it for 55 minutes can one deduct the difference on pro-rata there of?






    ;)
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Just joking around of course. There is no minimum time.
     
  5. Sonamic

    Sonamic Well-Known Member

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    Thanks guys. My partner posted the question. I'm trying to convince her to open her own account on here.

    The reason behind the question is the current IP under construction will not use all the funds to complete. Surplus Funds will be sitting in it's offset from a refi on another IP. Good for a large buffer, but I don't want to use it to go PPOR straight up as this will be deemed personal use. Correct? As there will be 2 CFP IP's linked to this account the buffer will quickly regenerate itself, so buffer is not the issue.

    The thinking behind the post is that we are looking to upgrade our PPOR in the next few years. So we build that now as an IP, Claim the bulk of the good juice on Depreciation and rapidly increase personal savings as a result of all properties being IO. When the time comes convert current PPOR into an IP and essentially swap properties. Use the increased personal savings to pay down a lump sum off the Non Deductable Debt and increase speed to the end game.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Be careful you seem to be borrowing money to mix with savings? Read my tax tips
     
  7. Sonamic

    Sonamic Well-Known Member

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    Current PPOR is with a seperate Lender with it's own account for PAYG in and associated repayments/ bills out.

    Once building is completed, 2x IP rent goes in, 2x IP repayments and bills come out. This is with a seperate Lender for 100% IP usage only. For both the IP under construction, and also the IP that was used for the equity release to fund the build. Linking that pair together. Just easier for me to keep track of and keeps it cleaner for accounting.
     
    Last edited: 16th Aug, 2015
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That is not as bad, but there are still issues. When the rent goes into the loan you will be contaminating it. You would also be capitalising interest.

    Why not just put the rent in the PPOR offset and pay the interest on the IP loan by direct debit.