Problems with interest rates and repayments? Ask for home loan help.
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 Buying a second home to live in whilst retaining your existing home requires consideration from a number of perspectives.
First you need to discuss the taxation effectiveness with your accountant and in broad general terms this should include negative gearing and capital gains tax. I stress that you need to seek your own qualified accounting and taxation advice relative to your circumstances and the statements below are general in nature.
If you rent out your existing home, Capital Gains Tax (CGT) may apply for period rented proportionally to the period owned. It may be wise to get a valuation on the property at the commencement of renting it out as this may reduce your CGT but please get your own taxation and accounting advice.
Interest and other costs on your existing home loan may be offset against rental income for tax purposes however the interest on your loan for the new home will not be whilst you live in the property. It is likely that you have paid off or reduced the debt on your existing property but may have to borrow for your new property hence the proposal may not be as taxation effective as buying the new property for investment.
Other aspects to consider are the financial and emotive issues.
Again you should seek your own financial advice however in general terms you need to consider:
- What is the likely rental income and potential capital appreciation of the properties?
- Will the increased borrowing be affordable and how will that affect your lifestyle?
- Is it wise to have an increased exposure to the property market?
- Is the location of the properties sound?
- Are there any zoning or density changes that you could take advantage of to increase value of your properties?
- Do you have a Managing Agent that you trust to manage the property to your requirements?
- Does the new property meet the present and future needs of you and your family?
- Is the location convenient relative to your family's needs for transport, education, shopping and recreation?
- Is the new property in a good suburb, not adversely affected by things such as noise, industry, badly presented neighbours or neighbouring properties?
- Is your existing property likely to depreciate or wear rapidly as a result of having tenants? Some building materials, floor and window treatments may not be sufficiently robust for tenant occupation.
- Is your existing property ideal for renting? Swimming pools and large or ornate gardens often make property less suitable for tenants needs?
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