News

Thinking of turning your home into an investment property?

By Rikki Cook

Turning a home into an investment property should be a financial decision, rather than an emotional one.

When your situation changes – whether it be relocating interstate for work or moving in with a partner – there are some things consider:

Is it emotional?

There are a number of considerations for home owners thinking about turning their principal place of residence into an investment.

Wakelin Property Advisory director Richard Wakelin believes people often have a strong attachment to their first home.

He says keeping the home is also often seen as a safety blanket for when the new move does not work out, and some people may look to eventually downsize there.

From a financial perspective, Mr Wakelin says the family home – or the first property – usually has a lot of equity because of capital growth and debt reduction.

Melbourne landlords can be choosey because the vacancy rate for houses is tight. “Because of the amount of equity in it, it’s usually positively geared,” he says. “And if something is positively geared, you’re paying tax on it as opposed to getting tax relief from a negative-gearing situation.”

The six-year rule

A principal place of residence is capital gains tax free.

Valuer and buyers’ advocate Greville Pabst, of WBP Property Group, says home owners can rent out their primary place of residence for up to six years and maintain a “capital gains tax free status”.

When it is leased for more than six years, the tax office would treat it as an investment property, which is subject to capital gains tax, he says.

“When somebody is relocating for work, or personal circumstances change, they really should speak to a financial adviser or their accountant as to how their tax status is going to change as a result of moving house,” he says.

Up to Date

Latest News

  • 4 questions you and your partner should ask before you house hunt

    Are you and your partner looking to enter the Alexandra Hills property market by buying your very first home? Working together could be a great way to increase your collective income and capital, and thus purchasing power. It’s also a fantastic opportunity to strengthen your relationship and overcome teamwork challenges. That said, … Read more

    Read Full Post

  • Make the sale with these three property staging tips

    If you’ve owned your home for long, chances are there are signs of you and your family everywhere. Worn carpets, well-loved furniture and stuff all over the place. And that’s fine – unless you have house hunters coming over. When you’re selling your property, a strong first impression is key. With so … Read more

    Read Full Post