Thanks Scott. To make sure, when you said interest, is it the mortgage interest?

Example: Loan is $120K repayment $850/ month. Total repayment = $10,200 for the 1st year. That consist of:
Interest: $8,800
Principal: $1,400

council rates, water, etc etc = $5,000
rent = $16,200

Net = income – interest – cost
Net = 16200 – 8800 – 5000
Net = 2400 (this is positive gearing)

Is this how you calculated?

Woot, thanks for the welcoming and the haste replies. I am enjoying myself here

Now that you mention about tax on term deposit; the 100% offset seems to be a very good idea. My initial thought was the account keeping fee of the 100% offset is higher than the loss I made by putting my money onto a term deposit. If I have thought about this earlier I might get a different kind of mortgage package that has 100% offset feature. At that time I thought I dont need that much flexibility hence I take the other package with less flexibility but lower interest rate.

@steve, Initially I am looking for growth than income. However as 1st home buyer I would like to live into the property I purchase. That is why it is not pure investment but "investment + to live in" property. The suburbs that I like to live in, the house prices are extremely too high for me. I cant find anything suits my budget. That is why in the end I settle for an apartment which I know it wont grow as much as the houses with land be, but what can i do? I just need to generate more money to live in on those houses on my selective suburbs.

With the interest only options I have thought about it but I am having an impression that the interest rate is higher and u can only do it on the 1st 5 years anyway. With what I have now 120K repayment $850 is on 7.67% and when I check NAB interest only options their rate is 8.39% making the repayment on $826. I would save $24/month = $288/year. 5 years = $1440. That is basically how much I save between my current mortgage deal and the interest only options. And on the 6th year the rate would go to standard variable rate and the repayment would be $978 for the next 25 years. And comparing those with "flat" $850/month for 30 years, I would have thought my current package is a better deal. Please correct me if I am thinking on the wrong direction.

I'm not red-ing to correcting you but just to show that I do understand them

That is basically what I am asking you . But my initial answer would be refinance for the 2nd one. Because of the 80K by "mistake" and I really like 1 property per year rate than waiting longer to produce profit in selling it.

Please enlighten me if I'm thinking the wrong way. Thanks again.