Things to Do: Making Owner Occupier Home as Investment Property

varunynr on 22/10/2018 - 16:42

Folks,

A couple of things that I think I need to do before I make my property as investment property. Would like to know in case I missed anything:

1) Make OO loan into Investment (Need advice if I want to make it IO as its P&I for now, I dont think I need to do this from TAO prespective, keen to know what others think)
2) Get my home insurance updated to landlord insurance.
3) Get property valuation done (to claim on depreciation? AM I getting this right ? I dont get this part but have seen other people mention this)
4) Anything else ????

Appreciate your replies.

Cheers

Varun

Financial

Comments

  • Ocker on 22/10/2018 - 16:53
    +1

    Be very careful on how you structure the investment loan for a property that is already in your name.

  • raytriplej on 22/10/2018 - 18:28
    +3

    Property valuation - from now on your property will be liable for capital gains tax so the valuation shows how much the property was worth when you started renting it out and will help you in the future when you sell. Otherwise sometime in the future when you sell they have to estimate what it was worth back when you started renting it.

    Depreciation Schedule - allows deductions on the cost of building your property. Amounts change depending on how old your property is. I have a feeling this changed recently so you will need to research - in fact may not be allowable anymore.

    Also our accountant recommended to keep the loan separate from personal spending. ie - confusion occurs if you have previously redrawn on the loan or if you want to redraw in the future.

  • mortgagebroker on 22/10/2018 - 19:30
    +2

    raytriplej is on the money!!! good advice.

    Go speak to an accountant, preferably one that has a financial planner and mortgage broker in-house to make sure you have the correct setup.

    Converting OO to Investment might not be your best option. You might be better off selling and buying a new(different) investment property.

    1) No need to touch your loan. Converting to IO will require a reassessment of your loan and much higher rates.
    2) get insurance
    3) get depreciation schedule done, an accountant will help explain this
    Extra) Get professional advice before you do anything.

  • elgrande on 22/10/2018 - 20:15

    1) remove emotional attachment

  • miwahni on 22/10/2018 - 23:43
    +1

    If you have money in redraw at present, consider if it's worthwhile pulling it out and putting it in an offset account instead (if your loan has offset feature). Reason being, you will be claiming a tax deduction for the interest charged to your loan, but if you want to pull out funds from redraw after you make the property into an investment, you may not be able to claim a deduction for interest on those funds if they're not used for investment purposes. (Note I said "May not" ATO rulings can change.) Your accountant will love you if he doesn't have to sit down and work out what portion of your loan interest is tax deductible, and what portion is not.

  • varunynr on 23/10/2018 - 10:58

    Thanks all. Looks like I need to talk to accountant. Cheers

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