Costs involved with investment properties

[mummato1]

We have only just brought a new house as our primary residence, so we decided to keep our other house as an investment property. It is all completly new to us, so I dont have much advice at this stage. We have a great accountant who has explained it really well, and what records we need to keep etc for tax time.

We ended up deciding to manage the property on our own, as I couldnt justify the agents fees when I was prepared to do the work. The initial forms are really straight forward, application forms, rental agreement, condition report and bond lodgement. I got the forms from Consumer Affairs (we are in Vic). We found our own tenants without advertsing, where we live has a huge demand for rentals atm so it wasnt hard. We did ref checks etc and so far it is all going really well.

It was always going to be a see how it goes thing, and if it doesnt work we are happy to sell the house. Neither DP or I are attached to the house so there isnt any emotional connection to it.

[misty]

Our current loan has a redraw activated but we'd be refinancing the property before making it an investment property - does that make a difference? Surely redrawing on the loan would only come in to play while its an investment not while its our primary residence?

Unfortunately, yes it does matter. We have made this mistake with our PPOR. Also be careful if you are refinancing not to increase the amount of the loan above what you would need to pay for the refinance of the original mortgage, because any extra pulled out will not be considered part of the "investment purposes" even though it is secured against an investment property.

WRT Capital gains tax, what happens if you move back in to the property within the 6 years, and use it as your primary residence again? If ever use it as an investment again does that 6 years continue from where you left off, or would it include the time where you lived in the property as a primary residence?

If you move back in before 6yrs is up, then no CGT is payable. You could then move out in the future and the 6yrs starts again - it is not cummulative. The only time a problem arises is if you purchase another property to move into in that time. You cannot claim more then one property at a time as a PPOR for taxation purposes - luckily if you are moving between two houses you don't actually need to "decide" which is the PPOR, until such a time as you sell one of them, however the other will have CGT applied for the whole period.

[Pandora]

Thanks.
Its entirely possible we would be moving back within the six years.
The redraw part sux.
We have a fixed loan and dont generally pay more than the normal amount, but I did have a sum of money that was sitting in that account for a while, to offset the interest thats all been taken out now. Oh and then there were the three occasions where the bank transferred money from our day to day acct to the mortgage without telling us and I had to move it back again.

ANyway its all usedful info to know, so thank you.