Why do you need both your homes as security for your new building? That amount of cross-collateralisation seems a big worry to me. If the bank won't lend you enough on the strength of the security in the 10 acres and new building, why not? Are you overcapitalising?
Is it legal to build two dwellings on one land title in that area?
It seems to me you are proposing jumping in with both feet, hands, ears, boots&all. Couldn't you live together in his house first and think about building an investment property together in a couple of years?
What % growth on the properties are you relying on to own your own home in 7 years? How confident are you of this? Given that property growth has to be ahead of inflation PLUS interest to make money.
Are you sure of being able to make the payments without you and your child going without, especially as you suggest you (now or soon) can't afford your home mortgage?
Sorry some questions are harsh and may be discouraging! Don't give up and do keep thinking… this may well not be the best way but you may find another. Good luck.

Good accountant: Finkelstein Hickmott
Good broker: Loan Focus

Q 1,2,3,4 – see 6

As far as I know, if you buy property in any kind of business or trust structure, you can't get tax breaks off personal income.

The WA office of state revenue has a dire warning up about cancelled and re-signed contracts. Not sure if the threat has any teeth but read & consider.

My guess would be that it'd been on the market for a while and the owners decided they weren't going to get the $ they wanted for it in this market. Ask the agent if the owners might change their mind if you offered their asking price. He oughta jump at the chance to get his commission after all. Assuming you are willing to offer the asking price

1) is the unit worth what they are asking for it
2) is the rent worth what they are quoting (beware unrealistic quotes and even unrealistic rental guarantees that will leave you short after expiring)
3) is there plenty of demand for units to rent in that area
4) is there any chance that demand for housing could go sharply down in that area eg town's main industry closing down
otherwise, sounds good.

I liked his book, I found it very inspiring.
I took it with a good handful of salt, like I do anything I read

I also believe that the only wrong way is doing nothing. I suggest that you look into exactly what you would do if you sold your current property before you think about selling. You may find that the alternatives make your current situation look quite good after all…!

Well I bet you feel better having got that off your chest

My mortgage broker refuses point blank to deal with one of the major banks because he says their incompetence is not worth the commission. He refuses to give any juicy details but I'm sure he has a story or two like yours!

I agree, they can do much better than the pension. How about a no doc mortgage on the property, increasing the amount each year. On a fully owned $1m property, growing in value at a very conservative 5% they can borrow $50k in the first year to live off, tax free. The property is then worth 1m + 5% = 1,050,000 so they still have their 1m equity. In the second year, they borrow say $55,000; 50 to live off and 5 to pay the interest on the loan. Now the property is worth about 1,105,000 so they still have $1m equity. And so on.

Given that it’s likely to increase at much more than 5% they should still end up with more than they started with, and have a much much better lifestyle than if they were on the pension. When they pass on, you can either sell or take on the loan. Good luck. [rambo2]

Anyone thought about this possibility?

Reasons people don’t invest in property: requires a large amount of money, can’t get out of it quickly, everyone else’s horror tenant stories.
Reasons people don’t invest in shares: perceived to be riskier, have to continually monitor, not willing to borrow for ‘riskier’ investment, can’t borrow over 50% (I’m no expert here, just some common perceptions?).

Now if you were to offer higher LVRs (80%) for investment in “safe as houses” residential property, that people can feel comfortable about borrowing for, but you don’t have to deal with too many 000s, you can get out of tomorrow, and have model tenants, plus you can save tax which “everyone knows” is A Good Thing….?? [baaa]

I smell a niche marketing opportunity…. [rambo2]