Things to Consider When Changing from Owner-Occupier to Investment Property 

As a homeowner, you may eventually find yourself in a position where you could benefit from switching your property from an owner-occupied home to an investment property. 

There are several reasons why this may be the case, such as relocation for work, but the most common one is that it can provide you with a steady stream of income, which will help you cover your home loan repayments and maintenance expenses. 

And if you’re looking for a way to boost your retirement savings, turning your owner-occupied home into an investment property could be a smart move—especially if there is a chance that you can generate positive cash flow. 

Ultimately, whether or not switching from an owner-occupied to an investment property is the right decision for you will depend on your individual circumstances. But if you’re looking for a way to generate some extra income or to have more control over your housing situation, it’s definitely worth considering.

Of course, there are some risks involved in any investment, so it’s important to do your research and consult with a financial advisor before making any decisions.

Here are a few more things you should keep in mind before making the switch. 

1. Can You Afford to Switch from Being an Owner Occupier to a Rental Property Investor? 

Switching from being an owner-occupier to an investor is a significant financial decision. You need to ensure you can afford the switch, as your living expenses are likely to increase. 

If you choose to buy a second property, you’ll have two mortgages and two sets of loan repayments. Or, if you choose to “rentvest” until you find a suitable new home, you’ll be paying rent yourself while also covering the cost of your old mortgage. 

So, you must evaluate your financial situation and ensure you have a buffer for unexpected costs.

2. Does Your Home Appeal to Renters?

Another important consideration is whether or not your home will appeal to renters. After all, if you can’t find tenants, your investment property will quickly drain your finances. 

So, what makes a rental property appealing to tenants? 

Location will always be a key factor, but beyond that, it’s important to consider things like security, amenities, and maintenance. Is your property in a safe neighbourhood? Are there nearby shops and restaurants? What is the rental competition like in the area? 

Answering these questions will give you a better idea of whether your property will likely be attractive to potential renters.

3. Remember to Notify Your Credit Provider About the Switch 

When you decide to rent out your owner-occupied property, one of the first steps you should take is to inform your credit provider about this change. 

This is not just a courtesy; it’s often a requirement. 

Your owner-occupier loan agreement likely stipulates that the property must be used as your primary residence. If you start renting it out without informing your lender, you may be in breach of your loan contract.

The reason for this stipulation lies in the nature of investment loans. These loans are typically seen as carrying a higher risk compared to owner-occupied loans. As a result, lenders often charge higher interest rates for an investment loan to offset this increased risk.

4. Are You Clued Up on the Tax Implications? 

Making the switch from owner-occupier to investor can have a big impact on your tax situation. For starters, according to the Australian Tax Office (ATO), if you’re an Australian resident for tax purposes, any rental income you receive from property in Australia is assessable.

Thankfully, you can also claim quite a few tax deductions for the expenses you incur managing and maintaining investment properties. For example, you can claim deductions for the following expenses: 

• Advertising
• Property management fees
• Repairs and maintenance 
• Interest on investment loans
• Depreciation
• Strata fees

These deductions can make a significant difference to your bottom line, so it’s important to familiarise yourself with all of them.

Next, you’ll need to turn your attention to Capital Gains Tax (CGT). If you decide to sell your property, CGT becomes a crucial factor. You should explore the main residence exemption, which could reduce your CGT.

Other types of tax on investment property include state-based stamp duty and land tax.

 

How Can Property Tax Specialists Help?

Deciding to switch your home to an investment property in Australia is a big decision with many tax implications. Property tax specialists can help you navigate the complex world of taxation and ensure that you meet all your obligations. 

They can help you calculate and advise on your property’s capital gains tax implications and the best way to structure your finances to maximise your returns. They can also help you with any other tax-related issues that may arise, such as income tax and GST. 

Get in touch to find out more about how they can help you with the shift from owner-occupier to property investor. 

Key Takeaways 

When deciding to change your home from an owner-occupied property to an investment property, there are a number of things you need to consider. These include the potential rental income you could earn, the costs of becoming a landlord, and the tax implications of owning an investment property. 

While the prospect of earning rental income can be appealing, it’s important to remember that being a property investor comes with responsibilities and costs. You’ll need to factor these into your decision when deciding whether or not changing your home into an investment property is the right choice for you. 

Additionally, it’s worth noting that the tax implications of owning an investment property can differ from those of owning a principal place of residence. Be sure to consult with a tax advisor before deciding to turn your home into an investment property. 

If you consider all of these factors, you can make a more informed decision about whether or not to switch from an owner-occupied to an investment property.

Disclaimer

Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.