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Turning your existing home into a rental property

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Your Investment Property | 09 Feb 2012, 12:00 AM Agree 0
There are many reasons why homeowners may choose to change their current principal place of residence (PPOR) into an investment property. Regardless of the reason, there are numerous factors that homeowners, and subsequent investors, should be aware of when making the switch, especially in regards to tax.
  • Michael | 06 Jul 2012, 01:50 PM Agree 0
    What is the tax impact if no loan is outstanding on the PPOR and owner moves out & rents it out as an investment property?
    Additionally, borrows say $600k using the investment property (previously the PPOR) as security for a mortgage and together with savings of say $500k buy a new property for $1.1m to live and which would become his new PPOR.
    Can the $600k loan be structured in a way to associate it with the investment property (previously the PPOR) so as to get a tax deduction for the interest payable on the $600?
  • Patrick | 08 Aug 2012, 07:49 AM Agree 0
  • Robert | 04 Jan 2013, 01:08 PM Agree 0
    What if a former investment property that is now a PPOR with no existing loan has a granny flat built on the property for which a new loan is taken out to finance it. The granny flat is then made a rental property while the owner continues to use the former home as a PPOR. Is the interest on the loan for the building of the granny flat tax deductable?
  • Graham | 11 Feb 2013, 09:15 PM Agree 0
    Previous PPOR has a loan through a line of credit, 400k is used to purchase the PPOR initially. Some 20k is paid of the loan in two years. A lump sum of 100k is paid off the loan. The place is then converted to a rental property. Can the loan be drawn down on to bring the loan back to the original 400k used to purchase the property or is the deductible interest on the now investment property based on the loan on conversion date?
  • Robert Holmes | 22 Feb 2013, 08:24 PM Agree 0
    I moved interstate for work 4 years ago, my home has been mostly empty in that time.
    I do not owe anything on it, but it is costing me a lot in rates and maintenance.
    I have now rented it out, can I borrow on the property and claim this interest against the rent?
  • Kalpen | 30 Jul 2013, 10:43 AM Agree 0
    Please if you can explain one thing in your essay

    1) If Main Residence owner rents out property for less than 6 years then return and lives in it for 12 months. Is he entitled for full CGT exemption?
    2) If main residence owner rents out property for less than 6 years then sells it. Is he entitled for full CGT exemption?
    Is there a different treatment just because Main residence owner did not occupy it after renting it for less than 6 year.
  • Lisa | 24 Nov 2013, 07:55 PM Agree 0
    I own my home outright and have lived in it for the past 5 years. I bought it just prior to the market dropping in 2008. I lost about 200K. If I were to sell now I would probably be still at a 150K loss. I was interested in another home but dont want to sell my ppr. I want to rent it out but will have to have a large home loan to buy the other residence. Do you think I would be better of buying the other place as an investment and renting it out for a few years before moving into it, and hopefully within that time my ppr would gain some value. Or would it be better to cut my losses and just sell and have a small morgage on the new place. I know that I cant transfer the loan to my ppr to buy the new home ( so I can claim the interest as an investment property.)
  • James | 07 May 2014, 08:21 PM Agree 0
    Hi, I'm interested in the answer to Michaels question. I have paid of half my home loan on poor and now wish to purchase another property to live in and turn my existing home into investment. Can I get a new valuation done and being the homeloan back up to the max so I can claim interest?
    • Rach | 09 Jun 2015, 04:28 PM Agree 0
      Any one have an answer to this?
  • shane queensland | 21 Apr 2015, 08:09 PM Agree 0
    I bought a PPOR property to live in and lived there for 8 months before relocating for a job. I rented it out for 4 years. During this time I bought and sold a few additional properties I lived in as PPOR residence. I am now looking at selling my original property and not sure if I will incur capital gains as I owned other homes during the time I was renting it. I bought house for 420,000 and now worth about 465,000. Would value your help.
    If I move back into my original property do I have to live there for a minimum of 12 months so that I wont have to pay any capital gains.
    Regards Shane
  • Bdog | 25 Jul 2015, 08:58 AM Agree 0
    Seek advice from your accountants people
    You can make good money paying careful attention to this rule
  • PeterSun | 11 Aug 2015, 01:04 AM Agree 0
    I think if you are in the position where you have paid a lot off your debt, and are planning on using the equity you have built up to leverage against and raise the funds you need to move into your new principal place of residence, you are likely to be topsy-turvy from a financial perspective, if you decide to turn your existing home to a rental property. The property which is about to become your investment property will have a small, tax deductible debt, while the property you are about to move into will have a large, non-tax deductible debt.
  • RileyHobbes | 11 Aug 2015, 09:55 AM Agree 0
    Your scenario where the home is first a PPR and then becomes a rental property and you pro-rate the capital gain is not relevant after 1996. After then, the cost base is the market value at the time it was first rented.
  • Mary | 18 Jan 2017, 12:51 AM Agree 0

    Good guide for those, who decide to lease the property by themselves.
    However, I definitely recommend to hire a real estate agent who has experience in renting vacancies. For first time landlords it could be very difficult to go thought all rental applicational process without professional help. The agent can screen prospective tenants and help you decide how much to charge.
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