May 21st, 2007

It is possible to turn a family home into investment properties when seeking to upgrade your home.

When thinking about doing this most people try to find out how to use 10% of the equity in their home as a deposit to buy a new home. Other common influences in decisions about this often relate to the amount of rental that can be sought for the old home if it was rented out, and what mortgage repayments would be for both the new home loan and potential investment property loan. Often first time investors don’t consider how much capital gain tax (CGT) they will need to pay when deciding to sell their current home in several years time. Investors need to ask themselves what is the best way to avoid paying high CGT for any property!

This might sound confusing, especially to investors who have not met with this issue before. All investors need to know is that if the do not consider CGT when they embark on purchasing an investment property they could pay high amounts of CGT when the current home is sold in future years.

To understand how this issue may affect you consider this example:

Mr and Mrs Smith purchased their home 5 years ago for $350,000 and now believe their home is worth $500,000. They have a mortgage balance of $180,000 on this home. They are planning to buy new home for $750,000 and are planning to rent out their current home for a total rental income of $25,000 per annum.

If Mr and Mrs Smith sold their current home to for $630,000, 3 years later, at the time of sale of the property it is an investment property and Mr and Mrs Smith have to pay CGT for this property.

Considering the rental income from this scenario, do you know if Mr and Mrs Smith can maximum their tax return on this property that is their current home but will be investment property in later years?

Do you know how to calculate CGT?
Do you know how to use the right procedure to pay less CGT?
What you can do to maximize your tax return given the current value of your home, and do you know how to use this property for maximum tax advantage?

Loanfor3properties can help you design a plan to maximize tax returns for a similar circumstance. Loanfor3properties can also prepare the necessary documents for the late sale of investment properties. Loanfor3properties gives advice about the right home mortgage to fit with this type of circumstance.

Loanfor3properties can provide assistance for investors seeking to turn an investment property into a home. Investment strategies for maximizing tax returns are very different for different circumstances and requires expert advice from a finance broker who can provide you with alternative mortgage plans.

If the above scenario sounds familiar call Loanfor3properties to make an appointment to discuss you circumstances of our experts financial brokers in detail.