Rental income question

[mrsaneperson]

Best advice is get it from the property accountant expert. Tony Thorne has first hand knowledge for everything to do with tax and property :

thorneaccounting.co.nz

[donna]

There is the LVR rule for borrowing to consider too, so if you buy as PPOR and take advantage of borrowing more and then change it to a rental - not sure what happens, if you don't let your lender know. I guess they could take your funding away? Or just do a valuation and get you to top up if required. e.g. you may have borrowed 80% or more, and rentals are 70% or less.

cheers,

Donna

[Sam3000]

Hi Donna, I had a chat with my bank. The answer was: as long as you say I am buying a house to live in and later changed my mind the bank will not do anything as they can't control people and their circumstances.

Now,the question is, I purchased a house and immediately after settlement day I rented the house. I am able to have the mortgage interest to be deductible? I put a deposit of 28% towards the house.

Cheers,
Sam

There is the LVR rule for borrowing to consider too, so if you buy as PPOR and take advantage of borrowing more and then change it to a rental - not sure what happens, if you don't let your lender know. I guess they could take your funding away? Or just do a valuation and get you to top up if required. e.g. you may have borrowed 80% or more, and rentals are 70% or less.

cheers,

Donna

[Sam3000]

Hi Bob, Now,the question is, I purchased a house and immediately after settlement day I rented the house. I am able to have the mortgage interest to be deductible? I put a deposit of 28% towards the house.
Cheers,
Sam

I stand corrected.
Ignore what I've said.

[Bob Kane]

It would appear so - yes, interest payments will be deductable.

[artemis]

Need to notify the insurance company if switching to / from a rental. Terms will change.

[Sam3000]

Sٍure will do.
Thank you
Sam

Need to notify the insurance company if switching to / from a rental. Terms will change.

[tpr2]

Great advice Bob

1. I think a good property accountant could work a way to get the interest deductible - perhaps taking out another mortgage and paying off the original mortgage. Or variations of that.
2. Expenses would be deductible.

As an aside, you don't 'convert' a house to a rental.
You just rent it out whenever you want.
Claiming expenses off the rental income is the tricky part - IRD may turn down your claims and then tax you on the rental income - the worst outcome.
There's a few accountants on PropertyTalk - offer them some $$$ for advice as they are invaluable on tax matters related to property.
Contact Rosco - he's good.

[Nick G]

My understanding is yes. My brother and sister did just this. I believe you tell your accountant the date you move out. I would seek some advice before you buy about what entity structure would be suitable in both circumstances and use that to purchase.

Please spend an hour with a property accountant to go through this in detail :-)

[Anthonyacat]

Hey All - Sorry I missed this thread earlier. I don't check PropertyTalk as much these days now Graeme's Facebook group is so popular.

For your insurance, you'll be wanting to notify them in advance, or you risk not being covered.

For your banking, most mortgages require you to tell your bank when situations change like this. In practice, very few people do it, it's not policed, and no one cares. But strictly I'm sure the banks could change their mind and cause you grief if they wanted to.

But as far as taxes go, your mortgage interest becomes deductible from the day it stops being owner occupied - or technically, from the day it becomes available to rent. You don't need to notify anyone, but you do need to keep good records for tax purposes. Please note only the mortgage that was used to buy the house would be deductible. If you've subsequently consolidated some credit card debt or a car or holiday loan onto your mortgage, that portion is not ever going to be deductible.

However, I very highly recommend speaking to a property specialist Chartered Accountant first. There may be tips and tricks specific to your situation that dwarf the costs of advice (savings from chattels depreciation for example often offsets my accounting fee for several years).



And as an aside Bob Kane - your understanding of how this worked was what I thought for a long time before my training was finished, and had quite an argument here on the forum with someone (Spaceman?) back in 2012 or so! But it simply doesn't make any sense when for example you reverse the situation. If you bought a property as a rental then moved into it, would you still be able to deduct interest? Of course not!

[Bluecoat]

problem with GF's facebook page, 20K plus members, only a few handful are "experts in their field" The rest just want to have their 2C in every post. Does my head in.

and its supposed to be investors chat group, you get posts on colour selection, gardening, cleaning and tenants who run roit against the greedy landlord!.

[AlFa]

problem with GF's facebook page, 20K plus members, only a few handful are "experts in their field" The rest just want to have their 2C in every post. Does my head in.

and its supposed to be investors chat group, you get posts on colour selection, gardening, cleaning and tenants who run roit against the greedy landlord!.

yeah another problem he likes to kick people out for questioning his mates and their moral guidelines

[Bluecoat]

And it seems the rules on advertising dont apply to him and Nick?