Can You Live in Your Investment Property?

Owning an Investment Property can be a lucrative way to build wealth and diversify your financial portfolio. However, one question that often arises is: “Can you live in your investment property?” Understanding the pros and cons of living in an investment property, as well as the financial and legal implications, can help you make an informed decision. This guide will cover everything you need to know, from the basics of investment properties to the tax implications of turning one into a primary residence.

What Is an Investment Property?

An investment property is a real estate asset purchased with the primary goal of generating income. This income can come from rental earnings, property appreciation, or even a combination of both. Investment properties differ from primary residences in that they are intended as income-generating assets rather than personal living spaces. For many, owning an investment property represents a long-term commitment to building equity and wealth.

Understanding Investment Properties

There are several types of investment properties, each with unique characteristics:

1. Residential Rental Properties: These are typically single-family homes, townhouses, or apartments that are rented out to tenants.


2. Commercial Properties: Office buildings, retail stores, and warehouses fall under this category, offering opportunities for business leases.


3. Vacation Rentals: Short-term rental properties in popular tourist destinations can be profitable but may come with higher management costs.


4. Mixed-Use Properties: These properties serve both residential and commercial purposes, providing a diverse revenue stream.

Investment property owners usually have responsibilities such as property maintenance, compliance with local rental laws, and property taxes. These obligations can vary based on property type and location, but they are essential for a profitable investment.

Turning an Investment Property into a Primary Residence

Now, let’s address the main question: Can you live in your investment property? Yes, you can turn an investment property into your primary residence, but there are important considerations and steps involved:

• Mortgage Requirements: By spreading payments over time, businesses retain capital that can be allocated to other operational needs or investments.




• Property Designation Changes: Asset finance payments can often be deducted as business expenses, potentially lowering a company’s tax liability.




• Legal and Zoning Considerations: Asset finance allows businesses to access modern, high-performance equipment without the burden of ownership, making it easier to stay competitive.

Things to Consider Before Living in Your Investment Property

If you are seriously considering making your investment property your primary residence, evaluate the following factors:

1. Financial Impact: When you live in your investment property, you forfeit rental income, which may affect your cash flow. Evaluate how this change would impact your overall budget.

2. Lifestyle and Location: Consider whether the property’s location aligns with your lifestyle needs, such as proximity to work, schools, and amenities.

3. Property Suitability: Some investment properties may not be designed for residential use, requiring renovations to make them suitable as a primary home. Factor in the costs and effort for potential upgrades.

4. Existing Tenants: If the property is currently occupied, you’ll need to provide tenants with adequate notice before reclaiming it for personal use, in line with local tenancy laws.

Tax Implications

One of the most critical aspects of living in your investment property is understanding the tax implications. Here are some key points to consider:

1. Loss of Deductions: When an investment property becomes your primary residence, certain tax-deductible expenses, like mortgage interest and property management fees, are no longer applicable.

2. Capital Gains Tax (CGT): Investment properties are generally subject to CGT when sold. However, converting it to your primary residence may make you eligible for certain CGT exemptions. The timing of this conversion can affect the extent of your tax liability.

3. Principal Place of Residence Exemption:: In some regions, living in the property for a set number of years may allow you to avoid CGT. It’s advisable to consult a tax professional to understand specific exemptions available.

Is Living in Your Investment Property the Right Choice for You?

Living in your investment property can offer flexibility, but it’s important to consider both short- and long-term impacts. Here’s a quick summary of the pros and cons to help you decide:

-PROS:

– Potential savings on rent or mortgage costs if you downsize.
– Opportunity to benefit from a home you already own.
– Possibility of qualifying for primary residence tax exemptions.

CONS:

– Loss of rental income, which could affect your overall investment portfolio.
– Potential loss of tax-deductible expenses.
– Renovation or maintenance costs to make the property suitable as a home.

The decision ultimately comes down to your financial goals and personal circumstances. For some, living in an investment property may be a strategic move, while for others, keeping it as a rental may be more beneficial.

CONCLUSION

Deciding to live in your investment property is a big step with financial and tax implications. At Blueprint Financial Services, we’re here to help. Whether you keep it as an investment or make it your home, our tailored investment property loans offer competitive solutions to fit your goals. Contact us today to explore financing options that support your property journey.