Hi
I'm suprised you're finding an abundance of positively geared properties for sale given the current climate.  So the house you're about to buy for $405k has to be returning rent of 29.5k per annum or $600 per week to cover the interest rate?  Seems high rent for country towns but if so good on you.
Carpe

Hi Andrew
I would leave the debt on the investment property ie the unit.  You owe 70k so the interest per year is about 6k including rates, mtce costs and the income is about 4.5k so not much of a loss that reduces in a small way the tax you pay on your work income.  In my view your primary goal should be to have no debt on your home (it is not a tax deduction) hence put the will money into it.  When you have paid off your home debt then use the equity in it to borrow for perhaps another investment property if you can afford the struggle (see below).  I have done well in property and I'd rather own an investment property that has a growth potential (ie best location) rather than a property that simply pays off the loan (positively geared) and has little growth potential.  Better of course to have a property that yields both but these days virtually impossible.   So choose wisely and go for location, location, location even if you end up with more coming out your pocket than you would with something else that is virtually a compromise and not worth tying up your equity plus your work in managing it.  I know there are some people out there who don't believe in letting go of any property they own…..I don't agree…..if the unit you partly own is not in a growth area then if sold it can reduce further the mortgage on your home .  Do your sums eg the debt on your house is 290K so the interest (7%)per year you pay out of your pocket per year is say 20.3k however if you had another 50k (say from the unit) taken of the mortgage your interest for the year drops to 16.8k which means you can pay another 3.5k off the debt and hence in each subsequent year you can pay more and more off the debt (ie maintain at least the current 20.3k payments each year even though the debt keeps dropping).  Anyway this information is just something for you to think about given that you are just a young couple starting out and believe me you don't want heavy debt in those early years if you end up having children.  Focus on the home and your family to start with.
All the best
Carpe

Hi BJ
A lot of the discussion on this is very interesting. I have been investing in property for years and have done very well. I have done some calculations on your situation based on the kind of modelling I used for my own situation. I am just providing some feedback but of course you need to get formal financial advice before you make a decision on what to do next. I do not like the high debt ratio you currently have of around 80% and the pressure on your living costs. If you stay on this path and your properties do increase in value by 50% over the next 6 years and you can pay off your home loan by an extra 10k per year reducing your net income to live off of 40k per year then it can be done. I actually put all your stuff into a spreadsheet but not able to copy it (copies but does not align) here so if you're interested then let me know if you want me to send it to you.

Based on fairly rough calculations on what you have provided your equity might increase by 425k based on a 50% increase in property values over 6 years and your debt ratio might come down from a very high 80% to about 50% (home loan goes down from 82% to 39% simply by paying an extra 10k per year). Your out of pocket costs over the 6 years has been 120k for the investment properties and an extra 60k for the home property (hence equity increase taking these costs into condsideration is 245K). It seems to me to be ok if you are able to live on a very tight budget of around 40k. If not then you might want to consider parting with the property that is least likely to grow in value and put more into paying off your home as your top priority. I do not know where your properties are located but realistically in today's terms can they keep growing at the same rate they have over the past 8 years?. I have very good properties in a capital city area that are now worth 2.5m (debt ratio 20%)and they have doubled in value over about 6 years but there is no way in the world do I think they are going to double in another 6 years so my view is that one should be a bit cautious with their levels of debt particularly on the family home. Also Tax rates are falling so much now that the benefits of negative gearing are not as profound as they once used to be on property investments. Anyway all the best BJ.
Carpe

You mention for investment purposes so I’m not sure you’re buying it to live in? If you are the two important things for you is to have a low mortgage and a property that is in the best location to assure you of capital growth. You have to like the property to some extent if you plan to live there a long time ….be it brick, fibro…..in the long term given it’s a growth location then it’s the land that becomes the most valuable.
If you’re buying it purely for investment purposes then I’m assuming you’re going to take out a mortgage on an interest only basis. The ideal is to have a high rental yield on the property that not only pays the mortgage but gives you an extra income. This is very rare these days so the best you can probably do is get a property that returns say 5% (ie cost of property 300k with an annual rental return of 15k meaning you pay out of your pocket the extra for the mortgage ie 8% loan interest is 24k less 15k rent = 9k loss plus the rates etc….all tax deductable for a total of 12k). So you might have a tax deduction from your normal income of about 12k that reduces the tax you have to pay. Some people focus on getting a lot of high rental return investments and don’t worry about the capital growth. The high yield may pay for the total mortgage payments but if your 300k property is still only worth 300k after 10 years and you still owe it all then what has been the point of this investment unless of course the rental returns after 10 years may be more than the cost of the mortgage. Still painful though as you would have to gather a lot of these properties to make it worthwhile however your debt could accumulate to levels of danger and of course you have all the pain and drama of managing so many rental properties. Go instead for fewer but good properties even if the mortgage level is a bit of a task. My advice is whatever property you buy make sure its in a location that is bound to experience capital growth……and this doesn’t mean just a nice place. It has to have potential for employment and business growth to attract people to the area. Sorry this is longer than I’d planned so I’ll now get off my soap box. Good luck and good on you for getting started.
Carpe

I don’t like fibro myself but it all depends on what your goal is with this investment. If you are buying it because you know it has a high rental return respective to the amount borrowed then it at least gets you into the market and does not burden you too much. It will be a better investment of course if the location of the property is such that it will return a definite capital growth. Hence its location is very important for the future ie for redevelopment into a better home or has the potential for unit development if its a large block. So in a nutshell

These kind of investments are available in Canberra. I’ve seen them advertised around the 120k price and I recall seeing them about 2 years ago for 100k so they do seem to have a good capital growth as your example also shows. I’ve never got into this type as I’m more focused on the land as others have said. It does look like a good investment with positve capital growth and yield returns. Personally I tend to keep away from having too many properties as the dealing with them all is a pain so I go for fewer/more expensive investments but not many can you buy these days that give you the 10% yield and 10% annual growth. Looks good if this type of invesment suits you.
Carpe

The best way to do a rental is on a monthly basis to be paid on a specific date each month. If the rent is $200 per week then multiply it by 52 weeks in year and divide by 12 for months of the year. That comes to 866.66 per month. So if the new tenant moves in on 10 March then he/she is to pay up front 866.66 and then until the lease expires pays you this same amount on the 10th of every month. Best electronic transfer to your account so that you can see it online.

Carpe