July 11, 2014
Have you ever considered moving house but keeping your home as an investment property?
You’ve lived in your current home for many years but it’s time to move. It’s now either too big or too small but it’s a great house. Why not keep it as an investment property while you go and move on to a place that suits your needs now they’ve changed. You can keep it as an investment property – you know it’s in good condition and you know it would be good for a renter. Maybe you can even drive past occasionally and check they’re looking after it like you always have.
On face value, it seems like a good idea but here are a few things to consider before going ahead:
When you own an investment property, it’s like running a small business. Costs you incur in earning an income can be claimed as tax deductions. The largest two of these are usually:
- Home loan interest. So if you have paid a significant amount off the loan (while it was your home) then may have reduced the amount you can claim when it is now an investment
- Depreciation. If they property is too old you may not be able to claim depreciation related to the building of the house or this claim may be less than if the property was new.
Therefore, financially, you may have been better off selling the current home, putting the sale proceeds towards the purchase of another owner occupied property and then, if you still want to proceed with the purchase of an investment property, purchase one that financially is a better investment than keeping the old owner occupied property.
There is a good chance, especially if you initially used Mortgage Choice to organise your home loan, that it met your needs then as an owner occupier. Now you are considering keeping the existing property as an investment, does the loan product you have and even the lender you are using, still meet your needs. Different products suit different circumstances so don’t just assume the current loan will do everything. Things such as Principle & Interest versus Interest Only, or Fixed versus Variable, same lender as your home loan or different can be determining factors and have different answers depending on whether you are an owner occupier or investor.
Have you realised it’s a good idea to have a good broker working for you? For more information, contact Peter Ruddock on (03) 9877 6471 or firstname.lastname@example.org