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#1 IBakeBoys

Posted 12 November 2012 - 06:14 PM

We're in Vic and looking to purchase our first home. We had started negotiating with the agent on one particular property when the vendor informed them they had decided to put in tenants for 6 months starting the next day (rented privately, not through any agent - you could tell the agent was very taken aback and not at all impressed.  If I hadn't made an offer then they wouldn't have found out until after the tenant moved in the next day)

We currently have a health care card so have an exemption from paying stamp duty. However if they consider the house to be an investment instead of a PPoR then we become liable for stamp duty.

If the SRO allow us to keep the stamp duty exemption, then does that mean that we can't claim any tax deductions for the interest payable on the mortgage until we can move in (ie, to help offset the rent we would be receiving) looking on the ATO website it said that you can claim deductions up until your intention to use the property as an investment changes. Is that a fancy and complicated way of saying while there are tenants there and you're getting rent? Or as we're intending to move in as soon as the tenant is out we're not intending it to be an investment at all, therefore no deductions.

I'm so bummed, we were excited to finally have property negotiations looking like they were going to go in our favour and now theres all this to complicate things even further. I don't even know who to go to for help? I guess I'll be calling SRO and the ATO tomorrow to figure it out? Any advice from property buying veterans so I can start to wrap my head around it before then?

Edited by IBakeBoys, 12 November 2012 - 06:15 PM.


#2 Wyn99

Posted 12 November 2012 - 06:20 PM

Why don't you negotiate a 6 month settlement so it's not an investment property, but your residence. Current owner gets to collect rent for 6 months and you don't have the stamp duty issue or problem of being a landlord for 6 months. Also if the tenants trash it then it's the owner's problem to fix before you settle.

#3 Three Of Hearts

Posted 12 November 2012 - 06:22 PM

QUOTE (Wyn99 @ 12/11/2012, 07:20 PM) <{POST_SNAPBACK}>
Why don't you negotiate a 6 month settlement so it's not an investment property, but your residence. Current owner gets to collect rent for 6 months and you don't have the stamp duty issue or problem of being a landlord for 6 months. Also if the tenants trash it then it's the owner's problem to fix before you settle.

I'd try and do this too.

#4 emnut

Posted 12 November 2012 - 06:34 PM

It at least used to be the case that as long as you move in within 12 months of settlement it is your PPOR so you would still qualify with a 6 month lease.


#5 IBakeBoys

Posted 12 November 2012 - 06:35 PM

That was the first thing we thought of however DP is due for a payrise in January which might loose us the HCC and therefore stamp duty exemption, meaning we'd have to come up with an extra $10 - $15k which we couldn't do, especially ontop of allt he concessions we'd lose with the HCC (kinder fees, gas, elec, prescriptions, rego etc)

I don't mind paying the stamp duty if we loose the HCC, but in this instance it means we'll not be able to afford the house anymore sad.gif

#6 protart roflcoptor

Posted 12 November 2012 - 06:38 PM

Would the rental income impact on your CLB and health care card eligibility? That might be a consideration too.

But yes, you can claim deductions on outgoings necessarily incurred in gaining or producing the rental income if you own it while it's rented out or available for rent. Not capital expenditure though.

eta; wow, didn't realise how many concessions you got with a HCC, being one of the middle income working poor myself.

If you can't afford the house without the HCC, maybe save up a little longer. The mortgage stress if the rates go up could be too much for you.


Edited by ossim roflcopter, 12 November 2012 - 06:42 PM.


#7 Madnesscraves

Posted 12 November 2012 - 06:40 PM

I'd start looking for another house OP sad.gif

#8 IBakeBoys

Posted 12 November 2012 - 06:45 PM

QUOTE (ossim roflcopter @ 12/11/2012, 07:38 PM) <{POST_SNAPBACK}>
Would the rental income impact on your CLB and health care card eligibility? That might be a consideration too.

But yes, you can claim deductions on outgoings necessarily incurred in gaining or producing the rental income if you own it while it's rented out or available for rent. Not capital expenditure though.


The rental income would loose us the HCC and change our FTB etc but that would only be after settlement, ie. after we get the stamp duty exemption or not. But we're teetering on the edge of loosing it now anyway so I'm about 90% sure we'll loose it in the new year so that doesn't bother me too much. And that would be spread out over the year, not just hit us in o ne lump like loosing the exemption would. Just wanted to jump into the market while we had it (exemption) if possible - prices are down, stamp duty exemption and cash in the bank are working in our favour - apprentice wages and 4 kids not so much! Should have known it wouldn't be easy!

We're still way under what we can service on a loan, an in addition, DP will be qualified in 12 months so we'll see a *ahem* significant payrise then! SO I don't think mortgage stress will be a problem. Banks are pretty strict with what they think it costs to raise 4 kids and we do it much cheaper than they claim the minimum is - economies of scale!

Edited by IBakeBoys, 12 November 2012 - 06:49 PM.


#9 Phascogale

Posted 12 November 2012 - 08:09 PM

I'd also be looking for another home.

Rental properties can become a headache unless you are prepared.  It's also a private rental, not one going through an agent unless you change that once you become the owner.  That might be a headache in itself.

This may not be the house for you.

#10 libbylu

Posted 12 November 2012 - 08:14 PM

Since when does having a HCC exempt you from stamp duty......I never heard of that?!?  Is that the case even if it is not your first home..i.e. if you are selling your home and buying another so it will still be your principal place of residence?

Edited by libbylu, 12 November 2012 - 08:15 PM.


#11 Fossy

Posted 12 November 2012 - 08:17 PM

Can you reduce your offer to cover the stamp duty?

#12 Lees75

Posted 12 November 2012 - 09:42 PM

I could be totally wrong.....
But if the potential rental income (minus allowable deductions) puts you over the limit for a health care card that means you weren't really entitled to the HCC all this financial year, therefore not really entitled to a stamp duty exemption in the first place.




#13 Rubixx

Posted 13 November 2012 - 01:22 AM

From the SRO (stamp duty) perspective, you have up 12 months from the date of settlement to move into the property. Yes, it will considered an investment property initially but the said property is the first home that you have purchased as long as you move into the property within 12 months. So you should still be able to meet the requirements for the stamp duty exemption.

Also, isn't the stamp duty exemption applicable from the date of exchange? So at the date you entered into a contract for sale, you would be holding a HCC. So in this instance, the exemption should apply.

Edited by Rubixx, 13 November 2012 - 01:23 AM.


#14 knottygirl

Posted 13 November 2012 - 04:28 AM

id be looking for another house.  you are going to end up owning a house with private renters in it?  what if they refuse to move?  or dont pay their rent?  you could be left with a big problem.



#15 2bundles

Posted 13 November 2012 - 05:16 AM

I agree with Rubixx. Usually it is the contract date not the settlement date that you officially purchase a property.

#16 MrsLexiK

Posted 13 November 2012 - 05:43 AM

I would look for another house. If you are relying heavily on the HCC how will you service both rent? And a mortgage. Your going to lose the HCC once you settle as the income from the rent will push you over the edge, but you will still have to service the loan and any rent you are paying now. The rent you receive may not line up when your payments are due for a start. You may have to hold off buying until your DH is qualified and you can afford the extra $10k (are you getting first home owners grant? We used that to pay the stamp duty)

#17 Nofliesonme

Posted 13 November 2012 - 06:03 AM

It doesn't sound to me like you are entitled to the HCC because it's a financial year thing. Therefore meaning you would still need to pay stamp duty. Nextly when we had a hcC we ever got an exemption from stamp duty........Just read your in VIC but I don't believe you qualify or your HCC

Edited by thunda, 13 November 2012 - 06:05 AM.


#18 mumofsky

Posted 13 November 2012 - 06:22 AM

In my case I was exempt but had to be on a particularly low income at the time and classified as a pensioner back then - it wasnt just all HCCs. Have you gotten really strong advice that its your type of HCC?

#19 SaintJoe

Posted 13 November 2012 - 03:04 PM

QUOTE (knottygirl @ 13/11/2012, 05:28 AM) <{POST_SNAPBACK}>
id be looking for another house.  you are going to end up owning a house with private renters in it?  what if they refuse to move?  or dont pay their rent?  you could be left with a big problem.


They are legally required to once the lease is up and there are legal ways to do this. They would also have access to the bond for missed payments. Insurance would also cover them with any payment or damage problems.

Lots if people purchase homes with tenants. It's common and not that big a deal.

#20 Phascogale

Posted 15 November 2012 - 03:10 PM

QUOTE
Lots if people purchase homes with tenants. It's common and not that big a deal.
That they do, however most of the time you are aware there are tenants before you put in an offer.  There is a very big difference to someone getting a renter for the 3 months (or whatever) it takes to settle because they need somewhere to stay for a few weeks for whatever reason to getting renters in with a 6 month lease.  As they have a 6 month lease you cannot kick them out until the lease is finished unless they choose to go early (you may be able to get them to move earlier with the right incentives).

OP, what sort of settlement did you want?  If you wanted a 6 month settlement then the renters being in there isn't an issue because they rent doesn't go to you, it goes to the current owner until settlement.

The issue that you might have is if the renters take their time in getting out and you need to move in.

#21 Mrs Mc

Posted 15 November 2012 - 04:05 PM

What type of lease do they have - have they even signed one?  i dont know the rules in VIC but in SA some leases have a 30 day or 60 day notice for the tenants to move out.

I would be checking the lease.  I would also be seeing if they can legally put tenants in there, in the middle of offer and acceptance.

Have you spoken to the tenants, they might be nice and willing to move

#22 PrincessPeach

Posted 15 November 2012 - 04:31 PM

I'd either find a different place - or have settlement in 6 months when the tennants move out!

I am not exactly sure how legal it is though to have the house on the market & at contract stage & then all of a sudden decide to put tennants in, without informing the selling agent.

#23 JRA

Posted 18 November 2012 - 03:25 PM

QUOTE (**myboys** @ 13/11/2012, 03:04 PM) <{POST_SNAPBACK}>
They are legally required to once the lease is up and there are legal ways to do this. They would also have access to the bond for missed payments. Insurance would also cover them with any payment or damage problems.

Lots if people purchase homes with tenants. It's common and not that big a deal.



It is not a big deal, BUT although there is landlord insurance and bond etc, and legal ways to move people, if you have a bad tenant it can cost you a lot of money, and that is something the OP needs to consider when looking at the economics of it all

#24 ms flib

Posted 18 November 2012 - 03:34 PM

I would be removing the offer. Have you committed yourself officially - signed papers and paid a deposit of any amount?

I would let the agent know that your offer only stands with vacant possession. Whilst you certainly can buy a house with ongoing tenants, it is a less desirable purchase. Considering that the vendor will receive 6 months rent, I would be negotiating a lower price.

But really I think this is a warning sign - get out of this while you still can!

#25 Charri36

Posted 19 November 2012 - 05:02 PM

QUOTE (ms flib @ 18/11/2012, 01:34 PM) <{POST_SNAPBACK}>
I would be removing the offer. Have you committed yourself officially - signed papers and paid a deposit of any amount?

I would let the agent know that your offer only stands with vacant possession. Whilst you certainly can buy a house with ongoing tenants, it is a less desirable purchase. Considering that the vendor will receive 6 months rent, I would be negotiating a lower price.

But really I think this is a warning sign - get out of this while you still can!


Agree ! Get out now! They are taking advantage of you. The seller sounds like a tool. You need to get your lawyer or settlement agent to look over the offer - different states have different rules regarding offers. If you stated vacant possession, and it's not - the offer is over. Please be very careful what THEIR agent tells you, you need someone working for YOUR best interests, not the sellers, not the agent - as they still get their fee, and leave you with the mess.

I've bought and sold a few place, I wouldn't touch it.

ETA - You also need to talk to your accountant to find out the pitfalls "if" you do go ahead. If it's tenanted, there is no way in hell I'd be having a 6 month settlement, if you looooove the house and it's undervalued - and you get the OK from the bank (who will asses your loan differently as it's a rental) and all the sums work out, it may be OK, saying that though you will need a fair bit of capital upfront to pay insurances etc. Are you except from Stamp duty due to being a first home buyer or is it due to the HCC.

If you don't know much about accounting/buying and selling properties then this situation can get pretty messy, and don't forget you'll be on the receiving end of it all.

Edited by Charri36, 19 November 2012 - 05:09 PM.





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