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What do I need to know before I sell my house in Brisbane?
April 18, 2012 3:21 PM   Subscribe

I'm looking to rent or sell my house in Brisbane, Australia, and am after resources on real estate and financial and tax implications.

So Dear Wife has a great job offer and so we are moving interstate. Our current finances are pretty simple - we're both employed by government/universities and all spare cash goes into the mortgage. So we own about 2/3 of our house (the bank owns the other 1/3). I may be jobless for a while but am going enjoy being a stay at home Dad. Planning to rent for our first 12 months in the new city.

Renting our old house will likely cover the mortgage, but the house will likely downgrade as a rental. Ie, if we want to sell in the next few years, we should sell now.

So I'm looking for resources and advice with regards capital gains, negative gearing, etc.
posted by jjderooy to Work & Money (2 answers total)
 
One of the big factors could be for how long you are planning on being away (if you are in fact planning on returning). If you sell now, as it was your primary place of residence, so you'd pay no capital gains tax.

If you rent it out for less than 5 years, return back and live there, then sell, again there would be no capital gains tax.

If you rent it out for 5 or more years then sell, a proportion of the proceeds (based on the number of primary residence years and rental years) would be subject to capital gains tax.

That's just one aspect though.
posted by trialex at 5:58 PM on April 18, 2012


Depending on when you bought it and, more importantly, where it is located relative to last year's floods, you are likely to lose money if you sell it now. If you can rent it out for the cost of your mortgage, insurance and maintenance, you stand to possibly make a reasonable profit by selling in a few years time, although there is a small risk of the value not increasing as much as it would if you lived there and gave it an owner's loving attention. As far as capital gains tax goes, you should consult with an accountant to work out what your options are, because it may be worth paying some tax if the home's value increases enough over a few years to more than balance this out. They won't be able to predict the real estate market, but should be able to give you some threshold figures that you can use to inform your choices.

Negative gearing, in my opinion, is a very bad idea for the average person. Sure, you save a pittance in tax, but you are losing money on an investment to do so. Unless investing in property is your main game, I don't think it stacks up and I've seen people lose money overall, even when selling a house later at a higher price - if you lose enough money on the house for long enough, you can never get it back. If your mortgage is only 1/3 of the house, there's no reason why you can't get enough rent to more than cover it as well as other costs, so there should be no need to go down this path.

You would be able to use your equity in this house to purchase a home in your destination city, so are potentially able to buy at the bottom of the market (ie now) and profit later by selling one or the other at the top of the market. Maybe. Possibly. Depending on a zillion factors that nobody can predict. Talk to an accountant anyway.
posted by dg at 9:10 PM on April 18, 2012


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