Unlocking the Potential: How AI Legalese Decoder Can Facilitate Turning Your PPOR into IP and Rentvesting
- May 4, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Analysis of Property Investment Situation
WWYD? Interested to hear other people’s thoughts. Apologies for my ignorance, new to this property investing journey.
Currently living in PPOR paying approx 100k/year (approx 2k/week) on P&I repayments. Total interest paid last year was 40k.
My income is approx 250k of which about 83k goes to tax. Sole income, wife not working, have 1 child.
If I rented it out I could get approx 800/week so let’s say 42k/year. So I’d need to put in another 58k to service the loan.
So if it’s 58k negatively geared, using a basic tax calculator, my tax would be 57k instead of 83k leaving an extra 26k in my pocket?
Does that sound about right or is it much more complicated than that?
Would it make more sense then that I should just turn it into a IP and go rentvest and live in a similar house and pay 800/week instead of the approx 2k/week P&I home loan repayments?
TIA
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**Only the Interest portion is tax deductible**, not the Principal.
Our repayments are the same, split $5K interest and $3K principal ($36K/yr). If yours looks that way too, then it’s not $58K negatively geared it’s only $22K ($58K-$36K).
Although then you’d add other tax deductions for things you’re already paying for:
* **Council Rates**
* **Water / Utilities**
* **Repairs and Maintenance**
Plus some you’re not
* **Landlord Insurance**
* **Property Manager fees**
And potentially **Depreciation** could be a big tax saver – we use BMT to do us a report, which shows how much we can claim each year.
Over the course of the tax year, this should mean more money for you (via less tax paid) as long as you rent something comparable. Go a little cheaper, and get ahead even more. But this won’t all show up immediately – your mortgage payment will still be the same, even if it reduces your tax bill next March.
Then be aware of the 6 Year Rule. While gaining instant tax benefits is sweet, having a PPOR which is 100% CGT exempt can be even sweeter. If you move back in within 6 years, you can keep that perk as well.
What about the expense of your own rent?