Turning PPOR into an investment - To do list

Hi all,

In 2020 I am planning on buying my second property and will be keeping my current PPOR as an investment property. I was just wondering what advice people have for things i need to before or during this process so I can be as prepared as possible. For example any minor changes that could increase potential rent or increase the value of the property as I will be using the equity for my deposit as well as general advice that will make the transition as smooth as possible.

As a point of context it is a 3 bedroom townhouse in Jesmond.

Also to my knowledge if I did any changes after it is technically being advertised for rent ten I could claim it on tax but from what I have read on here, that is just to messy and not worth the effort.

Thanks,
Nick

 

1. Consider getting a valuation report to establish current market value of the property for CGT purposes later down the line
2. Get a depreciation schedule
3. Review your PPOR home loan while it's still your PPOR. Remember PPOR rates are different to INV rates. (Technically you should notify the bank when it becomes your INV...)
4. Carry out activities that may involve having someone go through the property (eg: potentially releasing equity) before getting tenants into the property to minimise inconvenience for your tenants

 

Consider whether
- the loan is mixed and needs splitting
- land tax timing
- delaying improvements so you can depreciate
- extending loan term back to 30 years at OO rates
-borrowing more against it

This bit is not true:
"Also to my knowledge if I did any changes after it is technically being advertised for rent ten I could claim it on tax but from what I have read on here, that is just to messy and not worth the effort.:"

 

Thank you both,

@Terry_w in regards to the comment that you said was not true, I am assuming you are saying that being advertised for rent is not a marker for if I can claim it on tax. If that is not the case then what is the determining factor? Or like most things tax is it a relatively grey area?

 

The property has to be available for rent and not occupied for you to be able to start claiming things.
But generally improvements are not able to be claimed anyway. They would either be capital works and depreciated over 40 years or fixtures and fittings as these would be 'depreciated' over a shorter period, but could only be done if the assets are brand new at the point the property becomes income producing. So, for example, if you put in a $3k airconditioner while still living there you could not claim it and you could not depreciate it later when there were tenants in there.

 

Wonder if you are focusing too much on the repairs and depreciation side and what is likely your biggest expense: interest. What is the loan type, is it mixed use, offset account, etc?

 

Valid point, however I am focusing a lot on that side of things as that is a lot further outside of my comfort zone. The financing side I have a pretty good grasp on I believe and have somewhat of a plan for what I will do with my financing as I have done a lot more research in to that side of things and I work in the finance industry. Although I am surprised how little some people who work in this industry know about this kind of stuff

 

So to make sure I have my head around this, if I am planning on installing new blinds as the current ones are broken, the only way I would get any depreciation value is if I purchase them after vacating and having the property available for rent?

 

yes

 

Terry_w, if PPOR from purchase to 31 Dec 2019. Buy blinds and install on 31 Dec 2019, vacate on 1 Jan 2020 and available to rent.

Would the blinds be added to the cost base, or would it 'disappear' into the cost base reset (and 6 year rule if applicable) on 31 Dec 2019?

 

That should be ok

 

The problem with getting "maintenance and repairs" done once the property is available for rent, in order to claim the costs on your immediate tax, is that you want the place looking spoofy in the photos. It can be "messy" because some costs are instantly claimable and others are capital expenses. Does it really matter in the long term? The main thing is to get it rented as quickly as possible for as much as possible.

Here is a scenario: Some of the light fittings are rusty, discoloured and just look bad. Will you replace just the "broken" ones for instant (the property is available for rent) tax deductability, or will you replace all the light fittings at the same time so that they all match? Which solution will look better?

 

Also consider your insurance, suggest to go with one of the investment property specialists (EBM, Terri Sheer) rather than banks or others.
There are threads on this if you search the site.
Good luck!