Hi There,
I'm thinking of buying an apartment as an investment property, initially, then potentially live in it later. Is this a possibility? What are the pros and cons?
Thanks Ozzy B-G-ers in advance
Living in Investment Property After a while
koksanga on 17/02/2016 - 15:29
Comments
If you live in for 6months then rent out does that mean you also get the stamp duty discount?
Cheers mate. Why 6 months specifically?
Ask ato it's their rule.
To get first home owners grant?
Your "main residence" is exempt from CGT. But it has to genuinely be your "main residence", so that you can't say "i only have one property which i invested from day 1 and i want to claim the full exemption from day 1". You have to have actually established that it was your home. This is where the "6 month rule comes in". But there is no legislated rule that it has to be 6 months, but when considering all facts and circumstances, the general view is that you'd live in your home for AT LEAST 6 months (but it could be shorter depending on circumstances, or could be longer).
Once you establish the property as your "main residence", you can then move out and rent it out for a maximum of 6 years, without losing the CGT exemption during that time. This offers people a huge advantage. (FYI you can do this repeatedly. eg. You can move in after 5yrs of renting, live in it for a year and reestablish it as your home, and then rent it out again for another 6 yrs, again without losing the CGT exemption.)
If you invest the property from day 1 and then move in 5 years later to live, you are liable for CGT for those years you invested i.e have to do an apportionment calculation on the gain.
Nice, ATO's site has been Ozbargained. Probably by people looking up the 6-year rule
The above tax advice is sound, just make sure you can finance the loan in the first 6 months while you live in it. Furthermore, you can usually borrow more if it's for an IP instead of PPOR, so not sure whether that's an important factor.
What are the cons? You should know about the capital gains tax rule after 6 yrs.
Interesting username
It depends on how much rent you can potentially get with the apartment vs rent you need to pay to live elsewhere.
If your apartment can get you $400/week, but renting elsewhere (closer to work/bigger house/better features) is $350/week, then live elsewhere.
well, obviously you are newbie lol.
sorry cant resist.
disclaimer: this is NOT an financial advise! i am not qualified!
you should do the opposite, live in first at least 6 months then turn it to investment, so if you sell withing 6 years you dont have to pay CGT
disclaimer: this is NOT an financial advise! i am not qualified!