PPOR Into Investment Property

As interest rates have started rising again a number of home buyers may find that they have overstreached their borrowings and are looking at ways to reduce the repayments required to service their home loans. The best method to accomplish this is to convert your primary place of residence into an investment property. This will allow your tennant to make most of the loan repayments for you and all of your costs will also become tax deductible.

To convert your home into an investment property the following steps should be taken.

1. See a real estate agent to determine the approcimate rent you could obtain
2. See a property savvy accountant
   
3. List your PPOR with an agent to be rented
4. Take out landlord insurance on the property
   
5. Find a rental property for you/your family to move into
   
6. Convert your homeloan to interest only repayments
7. Get a depreciation report from a qualified quantity surveyor
8. DO NOT withdraw any money from your homeloan as this will effect the tax deductibility of the interest. If you need to access money from your homeloan then it might be possible to refinance
   
   

Once your property has been rented out the interest payments and other costs accociated with holding the investment become tax deductible. It would be a good idea to add a offset account to your loan and have the rent and salary paid into that account to ensure that all of the homeloan interest remains tax deductible. You may still make principal and interest payments if you wish, but its recommended that any extra money not be withdrawed from the loan once it has been put into the loan.

A quantity surveyor will come to your house and value all the fixtures and fittings and determine your building write off allowances, for new houses this can be a considerable amount and can reduce your holding costs quite considerably. These depreciation reports can cost between $400-$800 depending on who you use, and some will not charge a fee unless they find atleast the amount of the fee in depreciation. In a new house there should be around $15,000-$30,000 in depreciation available to use depending on the size, quality and fixtures/fittings in the house.

Before turning your PPOR into an Investment Property it would be a good idea to see a property savvy accountant that can assess your situation and determine what the best approach is for you.

See the investment scenario and finance structures on the left column to find out more information.