Is it possible to purchase new residential property but apply the loan to current residence that will beome investment property?

Hi there,

Is it possible to do the following:

We are a couple aged 52 and are considering turning principle residence into investment property (it's in prime position 6km from Melbourne CBD).

This residence has $87,000 loan owing (property is worth approx $1 million but needs cosmetic work of approx $30,000 to get up to scratch for rental market).

We would like to borrow $700,000 to purchase a new property (no stamp duty) that we and two adult sons will live in – prepared to move to outer suburbs (realise it's not prime real estate but larger home and closer to workplace).

Is there any way we can borrow the money for new $700,000 residence but have the loan applied to property 6km from Melb CBD?

This would allow us to purchase new residence without any loan at all.

This would also allow us to negatively gear the loan if it can be applied to the current residence 6km from Melb CBD (i.e. $700,00 loan added to current 87,000 loan = $787,000). 

Expected rental income would be $600.00 per week on 6km from Melbourne CBD property.

Loan amount owing after rental applied would be negatively geared.

We are self employed with approx $200,000 income per year.  This figure will reduce if we do not use negative gearing (i.e. we can save this but will have to pay tax on it if not negatively geared).  (Also have further $70,000 income from of adult sons – sons will be investing in properties with us). 

We also have $240,000 saved in cash and wish to purchase additional investment property (i.e. borrow $400,000 to 500,0000 perhaps.

Appreciate ideas about whether the above is possible.  Had brief chat to accountant who said we could sell current property to Family Trust (would incur stamp duty of approx $80,000 to do this).  If we could somehow apply the $700,000 loan for new outer suburb residence to existing principle place of residence 6km from CBD we would not have to sell the current residence to Family Trust.

Alternative would be to sell principle place of residence (hate to sell a property in such a prime position if we don't need to).  This would result in following:

1.$913,000 from sale of current property & $240,000 savings = $1,153,000 available cash (less sales commission to agent)
2.Purchase outer suburb home outright for $700,00 (no stamp duty). 
3.Remaning funds from sale of current property = $453,000 (less sales commission).
4.Purchase, say, two investment properties in inner Melb suburb, i.e. put $200,000 deposit on two properties, worth say $400,000 each).

Either scenario would:

1.Release equity built up in current home
2.Provide new residence with better living conditions, closer to workplace – debt free.
2.Allow for additional two investment properties (consisting of either current residence plus one extra property, or two new investment properties if current residence sold)
4.Provide negative gearing against high income (expected to continue for next five years)

We would then chip away at new loans with a view to turning negatively geared investments to income producing as we head towards retirement age.

Hope I have not rambled and many thanks for any suggestions on above scenarios.

Cheers to all.