There is always the balance of ‘do I buy my own home first or an investment property’. Well what if you could save yourself between $10-30,000 for your investment property.
And it doesn’t even have to be your first IP. Could be your second or tenth.
It all comes back to your personal values and lifestyle goals. But there is a way in which you can get a financial ‘leg-up’ in purchasing an investment property.
And here it is:
You purchase this investment property firstly as your owner occupier or principle place of residence.
If you buy a place to live in – with a view of turning it into an investment property in the short term, then there are some great advantages that ‘may’ suit you.
Here are 6 reasons you might just find this will work for you:
1. When you purchase property you are subject to Government Stamp Duty. This is significantly less if the property is to be used by the purchase to live in, rather than rent out.
For example in Qld – Total fees for the purchase of a $450,000 property as an Investment is $15,370.80.
The same property when purchase to Live In attracts much less Fees of only $8,195.80.
That’s $7,175 in difference.
Now how ling would it take you to save that extra $7,175.
2. Now the news gets even better is you are a First Home Buyers. In most States, First Home Buyers are EXEMPT from paying Stamp Duty at all.
In Qld – you are only required to pay transfer fees totalling just $1,195.
In NSW you are only up for $328 bucks.
So compared to buying as an investment there are potential savings of at least $15,000
3. Next one. First Home Buyers Grant. Again in most States there is the FURTHER BONUS of receiving the First Home Buyers Grant (if indeed you are a first home buyer). This can be up to $15,000 or even $20,000.
If you used $15k as a yardstick – there is potential savings so far of $30,000.
That’s $30,000 that you DO NOT need to have to purchase your investment property, simply using the interim step of purchasing it to Live In first.
4. The 6-year rule. One of the other benefits of owning your own home is the Tax Office rule of Capital Gains Exemption. Meaning that if your home goes up in values and is worth more when you sell than when you bought – you are not required to pay any tax on the Capital Gain.
If you turn your home into an investment property well – it’s no longer your own and if you sold you would need to pay the tax on the Capital Gain.
HOWEVER, if you rented for this period and you intend to at some point move back in – you may be able to still benefit from the Capital Gain Exemption rule as long as you sell with 6 years (the current ruling) of when you bought it. BONUS eh!!
5. The last benefit is – that the huge savings you’ve made when buying your home can be further enhanced once it becomes an investment property. Because any short term losses or deductions should now be tax deductible – including the Interest you are paying on your loan.
What started out as a non tax deductible, personal loan can now be transitioned into an Investment loan where the Interest should now be 100% tax deductible.
6. Oh – and a BONUS reason.
Using rent to reduce the mortgage. And I guess one of the last opportunities could be, depending on how your loan is structures, you may be able to using surplus income or rent to reduce the investment property loan.
** And if you DO move back into this property to live in – your non tax deductible mortgage is now less. Double BONUS!!
Now the above is a scenario. Which may or may not be suitable for you.
I wanted to give you some ideas as to things you can achieve when thinking outside the box.
All good ideas like this firstly come from having an Investment plan linked to your own Goals & Dreams. If you want to get some Clarity around YOUR goals and DREAMS – book in for your FREE Finance & Investment Clarity call.
Using the link below.
FREE Investment Clarity Call – Book A Date & Time That Suits You
Good luck.