Newly constructed house - hold as PPOR, IP or sell

Discussion in 'Investment Strategy' started by mpty, 15th Sep, 2017.

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  1. mpty

    mpty Active Member

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    We currently live in a townhouse which has been our PPOR for the last 8 years. Our new house is under construction in North West Sydney and likely to be completed by the end of the year.

    Initially we intended to move into our new house and convert existing PPOR to IP. Under this scenario our townhouse IP would be neutrally geared.

    Now, we are considering the option of selling the new house and possibly the townhouse and purchase a PPOR in an established area. The difference between the cost of the our newly constructed house and the bank valuation is likely to be aprx. +80K. This is excluding interest payments on land and construction loans. Existing PPOR is used as security for the construction loan.

    What factors should I consider before deciding whether to sell, hold or convert new house to IP?
     
    mpty, 15th Sep, 2017
    #1
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    If you built and will sell without living in it, check with your accountant as the ATO might look at you as a developer.
     
    Jess Peletier, 15th Sep, 2017
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  3. geoffw

    geoffw Moderator Staff Member

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    There's potential tax implications with interest payments when you convert a PPOR to an IP. Check with your accountant for this as well.
     
    geoffw, 15th Sep, 2017
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  4. Brady

    Brady Well-Known Member

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    Selling a brand new asset... I'm not an accountant but I see GST and income tax on profit.
     
    Brady, 15th Sep, 2017
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  5. mpty

    mpty Active Member

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    Construction loan type is IP.
     
    mpty, 15th Sep, 2017
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  6. mpty

    mpty Active Member

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    GST? Also how long does it need to be occupied for before it is no longer considered brand new by ATO?
     
    mpty, 15th Sep, 2017
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  7. geoffw

    geoffw Moderator Staff Member

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    Read this for an intro, though it doesn't cover some things (eg having a period of time when two houses can be claimed as PPORs for CGT exemption)
    When does it make sense to turn your home into investment property?
     
    geoffw, 15th Sep, 2017
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