So, you’ve just bought a new house and you’re wrapped and excited to move in. It’s no doubt bigger or better than your previous home and you’re looking forward to your new lifestyle. But what to do with your existing home? Sell, or rent it out?
Financially speaking, the best solution is highly dependent on your individual circumstances.
The decision comes down to several factors including:
• how much you owe on your existing mortgage
• how much more you will need to borrow for your new home if you decide to keep both properties
• how much higher your repayment schedule will be if you decide to keep both properties
• what kind of rental income you could expect if you keep your first home and rent it out… and is it a good investment property?
There are also tax implications to consider based on the ownership of a property which is not your primary place of residence. You will need to consider your long term plans for your first property in relation to renting it out, leaving it vacant or returning to live in it at some point. All of these factors will impact whether or not you pay Capital Gains Tax if you choose to sell the property down the track, which could be a substantial amount.
There is also tax on net rental income, however there are tax deductions to be made on rental expenses including interest, agent’s fees, water fees and rates.
And what of the property? How much annual maintenance would it need to be attractive to good tenants? What other costs are associated with Property Investment?
By taking into account the above considerations you will already be well placed to get a better understanding of your net worth in the future if you were to sell or rent your property. Please come and talk to us for honest advice regarding Property Investment, and speak with your accountant or financial adviser to get some additional help with your choices.