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PPOR to IP?

Discussion in 'General Property Chat' started by Joshwaaaa, 19th Jul, 2015.

  1. Joshwaaaa

    Joshwaaaa Well-Known Member

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    22nd Jun, 2015
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    Location:
    Adelaide
    Still a bit of newbie to it all, so a little unsure here. What exactly should I take into account when turning my ppor into an IP?

    We have just split this block in half so a bit of it's "value" is lost. If we were to sell going off the prices a couple agents we have had out to give us a price guide, at most we would end up with $10-$15k in hand after agent fees etc. So aiming for the tax free thing seems a little pointless. It would also be positively geared around $50-$60 a week.

    Just trying to decide whether to head towards selling it off or not. Misses wants to sell I want to keep, I just cant see the negatives to keeping it unless I'm missing something.
     
  2. wylie

    wylie Moderator Staff Member

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    We have only ever sold when we had to. I regret every sale. If there is $60 per week in your pocket now (from rent on the old PPOR?) and you have created a new vacant block by splitting, what will you do with the block if you don't sell it. Why not build a new PPOR on it which could mean you save tax when it is sold and keep the rent flowing from the old PPoR? (I am making assumptions here about your situation and more information would mean better answers).

    Things that will clarify your choices -
    1. Why did you do the split? To sell the half with a positively geared IP or to build on the vacant half?

    2. If that is the case, you have a free block of land. Can you borrow to build a new PPOR on it or do you want to buy a new PPOR.

    Unless you have a new PPOR chosen elsewhere, why not build a new PPOR on the vacant half, keep the old PPOR (now a rental putting $60 per week into your pocket), selling the new PPOR when you want with no CGT. The old PPOR would be taxed on sale so you would get a valuation when it goes from PPOR to an IP.
     
    Last edited: 19th Jul, 2015
  3. Sonamic

    Sonamic Well-Known Member

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    Sunny QLD
    If you sell then it becomes somebody else's. So not an IP? Keep it and build on the new split block, rent both out and play it again Sam. :D
     
  4. stumpie

    stumpie Well-Known Member

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    If you sell the block, you'll need to allow paying tax on the profit from the sale of the block.
    If you sell the PPOR this will be tax free as it's your main residence.
    If you decide to keep the dwelling and turn it into an IP, suggest you do the following; get a valuation to establish a cost base, get a tax depreciation schedule (@Depreciator ) on here can help you with that, register for land tax if necessary, hold off any repairs or maintenance until you officially make it available for rental.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Don't forget to split the loan into appropriate portions.
     
    joel likes this.
  6. Joshwaaaa

    Joshwaaaa Well-Known Member

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    22nd Jun, 2015
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    Location:
    Adelaide
    Cheers all, I have to look into it a little further but going the ip route is looking the way to go. Current ppor is freshly renod with everything under 3 years old (1960 house though) , so maintenance should be low and a chance of depreciation.

    We have already built on the subdiv, and after speaking to our accountant making that our new ppor is looking like it is the plan for now, we dont have anywhere else to live for the time being.
     
    srirang likes this.
  7. srirang

    srirang Well-Known Member

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    Location:
    Melbourne
    Sounds like you are getting sound advise. The general principle I try to follow is: Don't sell if you don't have to. You make money when you buy, not when you sell.