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Changing your family home into an investment property

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Picture this: You’ve been offered a two-year job in a dream city; yet want to return to your home in the long run. Or maybe your children have grown-up and moved out and you’re thinking about downsizing – or upsizing. Maybe you’re simply ready for a permanent change of scenery.

Whatever the reason, you may be wondering why you should have to give up your current property and all the equity you’ve built up over the years – when the simple answer would be to just rent it out to a tenant and enjoy a (relatively) easy income stream. There are a lot of success stories out there about converting a primary home into an investment property and there are a lot of potential benefits to doing so.

However, when making this major leap, there are a number of important considerations you need to bear in mind. Here are some initial questions to ask yourself before you make any decisions about turning your family home into an investment property:

Do I ultimately plan to return to the home I love?

If your relocation is temporary, and you intend to return to your ‘home sweet home’, then a conversion is the right thing to do – as long as you meet the six year rule. Under this rule, your property can continue to be exempt from capital gains tax (CGT) if it's sold within six years of first being rented out.

An experienced real estate lawyer can help you navigate your state’s unique tenancy laws, and also draw up the contract with your professional property manager. Private home owners can manage their properties on their own, but it’s not for the faint hearted. Often, the costs for using experienced property managers can be well worth it in the long run. It can help make your life a lot easier and free from lurking errors and penalties and nasty surprises from tenants.

Keen to know the difference between new and old investment properties? We've got our own pros and cons list to help you decide what's best for you.

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Is my property in a strong rental market?


Owners sometimes overestimate the desirability of their home in the current rental market. To avoid this, do some research on comparable properties in the area before you assume you’ll be able to cover all your associated costs, or fully cancel out that next home loan repayment.

That same quiet street that was great for your growing family might not be convenient for young professionals in need of amenities and access to transportation. Market research and property valuation could help you get a solid idea of whether this investment is worth it.

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Will changing my family home to an invesment property bring me a solid income and tax benefits?

Depending on how long you’ve owned your home, and whether you are positioned toward positive or negative cash flow, the financial analysis might work out in your favor. If you’re really ready to cut the cord and offer new tenants a new home, do your due diligence on how it will affect your overall bottom line come tax time.

Home loan structures, intricate tax considerations, your needs regarding CGT exemption – these are all critical parts to the equation, and will vary depending on your specific situation. Converting your main residence into an investment property can definitely be a very lucrative move, especially once you’re confident it is the right decision for you.

Now that you know you’re ready, it’s time to see how much your property is worth and whether you’ll need to make some minor changes to the property. With some careful planning, you may be able to get yourself some pleasing rewards. Talk to a Lendi Home Loan Specialist for expert advice on property investment.

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Tags: property, refinance, investment property, home, home equity, investment, investment return, investing

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Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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