Use equity in Sydney home to buy property in UK

Question for expat investors
Can you use equity in your Australian property to buy an investment property in the UK
currently Uk and Australian citizen
I think there would be a lot of issues around tax but prices a lot cheaper than Australia currently with decent CG growth in Scotland
Thinking of buying parents house and renting out or keeping for CG down the track

 

You could borrow against an Australian property and use those funds for an overseas property purchase.

 

Thanks Terry
If it came to selling it would I need to pay CG tax in Australia and UK ?
If I was renting would I just put the rental income on my tax return in Australia as normal?
Could I claim all the usual stuff for an IP in another country such property management costs, council rates etc
Thanks

 

yes to all

 

Is Scotland still UK?

Scotland is too cold, and the sun doesn't get up properly....

 

I own in both countries.

I have just drawn equity from my Aus PPoR for another UK investment property. I pay tax on my UK rent every year.

There is a double-taxation agreement with Australia. My understanding is whatever tax (say CGT) you pay in the UK, is deducted from what the ATO will want. I’ve never sold so only paid tax on my income in both countries.

I would say don’t be fooled by the “cheapness” of some UK properties. Definitely more “affordable” but the UK has seen exponential property growth in the last 10 years (mine has nearly doubled after 7 years). Also, when you take out further liabilities in Australia (loans) and transfer the funds to the UK, your AUS serviceability is impacted. Further, you will not benefit from any future Tax advantages you could benefit from by investing the funds in Australia.

One point I must make is my rental yield from UK property compared to my Australian IPs is double in the UK and I think your strategy i.e. drawing equity to purchase in Uk is solid.

 

Thanks David
What rates of tax do you pay on your UK rental income? Is there information anywhere which breaks this down.
I have been looking at areas that are very familiar to me and where I still have family close by
Rental yields look very good ie GBP150K ($280, 000 AUD) purchase gives rents of GBP 800 plus per month or $1500 AUD roughly and costs to service that loan on IO is $630 per month. Decent returns but then you have the tax implications to think about. I have approx $1.5M in equity in my current property in Sydney which would mean a very low risk amount and fairly easy serviceability costs.

 

Zero because we are still entitled to our Tax Free threshold.

There will be a cost to service the Equity Redraw (say $250,000 on IO will be about $500/month).

I don’t know if you plan to buy outright or put down 25% and take out an Expat Mortgage? I put down 25% and take out a UK Mortgage.

The buying strategy tends to be a bit different, I.e. I look for properties that do not need any work and are low maintenance. It’s just not worth the headache of renovating and/ or maintenance work.

What areas are you looking in? I was really keen on Edinburgh but has got expensive (in my view). I buy in the West Midlands as I have an established relationship with a good Property Manager.

 

Hi
So if you are under you UK tax free threshold you would just add on your rental income on to your australian tax return and they would make the deductions as normal and you would not be paying anything on the UK piece.
Would plan to buy outright.
Dennistoun in Glasgow is where I am thinking very close to CBD (10 minutes by train), universities, hospitals. Captures office workers and students. Steady CG over recent times but not crazy. No room for further developments and supply demand would not be impacted.

 

Yes, you can access equity via cash out against existing property and use those funds to purchase a property elsewhere.

 

Hi Colin
Can you get the full amount as a cash out to buy the property outright or would you need to put down a cash deposit?

 

Hi
Just spoke to Athena Home Loans who have my current home loan they say I need to buy a property in Australia for then to offer cash out to purchase an IP.
Are there many lenders that offer this service?

 

Oh yeh, you’re not supposed to disclose that the money will be used for overseas investment but you’re broker should’ve coached you in that respect.

Home improvements and ASX investments

 

I just spoke to a broker and they said as you mentioned that you just say it is for an investment and they dont need to know what kind of investment. Athena said they would need to see a proof of purchase document which may throw a spanner in the works. I may need to move providers who dont ask for proof of purchase.