Hey Guys, Please bear with me as I try and articulate my question. What are some of the better strategies around for buying a PPOR? We are DISKs (Double Income Single Kid) and looking at buying something in Sydney for up to 2million. Both on highest tax brackets. The thing is we are in no rush and can quite happily hang off moving in for 5 or so years as we transition from inner city to something a bit more suburban . One strategy I am contemplating is buying a place now-ish as an IP and getting the benefits of deductions, some renos and rental income for several years. Is this worthy of consideration assuming more 'normal capital appreciation' in Sydney while continuing to rent. Im not too concerned about CGT as intend to hold the property for very long term.
Forget if you plan to live in it or not, your question is really the opportunity cost of the following: Investment return on your funds (deposit money) where they currently are now for "x" years until you are ready to buy less the amount the property would have gone up in the time you rented and were ready to buy Vs Purchasing now and capital growth benefit from holding, add back tax losses less any negative gearing and reno's. Something like this..
Check out my various tips in the legal and tax sections. One strategy is to buy the property in one name. There are various benefits such as increased serviceability, asset protection and tax advantages later. If the property would ever become an investment property then owner could sell 50% to the other spouse who could borrow to buy. This could be done without stamp duty, if transferred before moving out. This would increase deductions and release equity to be used in the new main residence. Other strategies include related party loans to enable the buyer to borrow 105% now to purchase - which could help with increased tax deductions later. Another one is to buy, move in and then move out later and rent the property while renting somewhere else yourself. Negative gear yet retain full CGT exemption. And you can combine all of the above. Many issues involved so seek legal advice before trying these.
@Greyghost , @Terry_w I appreciate you taking the time to answer. A lot to digest and mull over . Thank you
Agree - Important that both parties understand that the land tax issues if its rented or occupied as its a common misconception to think the non-owner spouse can also acquire a PPOR and its exempt. Reality may be different. The spouse to spouse transfer / refinance of 50% later when value increases AND just before occupancy ceases can give rise to converting non-deductible debt into deductible debt without the normal cost of duty etc. Terry and I have done this for mutual clients and it can be a winner. Long term planning is the key. If you buy 50/50 now you miss that benefit.
You are in a v. strong position - you have cash available and a timeframe of 5 yrs. I would say your primary strategy should be to wait for a distressed $3M or $4M house to become available & offer them $2M on their terms. The benefit will far outweigh trivial stuff like deductions, renos etc, and even 'normal' capital gains.
That would be some discount.... It is a good strategy though. When we bought our POR in Sydney a few years ago, we rode the price down a good 6 months from the first time I saw it, until it was just within our affordability range at the time. When I first saw it I was only dreaming that we could buy it, but we earned more money and the price dropped at the same time. It came down about 600k during that time and was as low as it could go in my opinion, so it worked out to be good timing.
that dead money is a roof over our head with great water views, a pool, safe close to the city and a zillion cafes close by. I dont consider it dead money
