When to renovate IP?

I am looking at purchasing my first investment property this year. I plan to be a rentvestor, buying and holding IPs long-term while I myself live in rental properties.

After research, my selected suburbs for IP1 happen to be in Adelaide, where I live. This has presented the opportunity of purchasing something that can be cosmetically renovated, to manufacture a bit of equity. I would move into the property for the first 3 months to do this, then return to renting myself, and begin renting out my IP. It would be purchased as an IP, so no messy loans or trying to convert it from a PPOR.

However, in terms of tax and depreciation, is this a silly order to do things in? Would I be better off leasing the property before I touch it?

From the forum, I believe there is a requirement that the property must be available for rent in order to depreciate items. Someone suggested finding a tenant and giving them free rent for the first two months while they can't live there, to get around this. Is this legal?

 

I can't speak for your last question but, yes, renovating the property while living in it will disqualify you from claiming depreciation on the plant and equipment you install. It would only be okay if your tenure there were "incidental"--three months is not incidental.

 

Its one way. The benefit of residing then renting can be the main residence absence concession. However just living there a short while may be open to conjecture about whether you have established this as your MAIN residence or its justa temporary one. Personal tax advice should address that aspect.

Your proposal is not valid and suported by tax law. The USE of the property must be to produce rent - Now. Not later. Initially some costs will be private and then from the time its actually available for rent then deductions may commence. Some may need to be apportioned based on that date (eg insurance paid up front). Depreciation of plant items existing from your period of occupancy could be lost too. If you replaced appliances AFTER you leave they would still be new. But if you use them or buy them with the property they are used and ineligible.