Would love to have been there, will look forward to the next one.

Julie,

It's great advice from Richard and Dan, but I thought I might offer another suggestion.

If you were to sell the property for $520,000 (and I agree with Richard about doing the cosmetic work) then you would have $180,000 (give or take) to put towards your goal of having an IP and PPOR.

You could consider using that money to secure funding to develop your own IP and PPOR. Assuming an LVR of 80%, this would indicate a budget of $900,000 ($180,000 + $720,000). It gets a little bit tricky from here, but stick with me!

You find the land in the right area, that is suitable for a dual occupancy. That is to say, an existing dwelling with enough land to build a second dwelling. Let's say then that you were to purchase this property for $700,000 ($180,000+ $520,000). The next step would be to carry out the town planning and sub-division works – after which you have two properties. This is also the point at which new values can be ascribed to the original dwelling and the proposed second dwelling. Let's say the bank board valuer (who you should engage) ascribes a value of $650,000 for the existing dwelling (on its smaller allotment) and $500,000 "value at completion" for the second dwelling as proposed. By this time you will have spent say $750,000 ($180,000 + $570,000). Your two properties – when complete – would be valued at $1,150,000.

Theoretically, you should then be able to fund $920,000 ($180,000 + $740,000, 80% of $1,150,000) and complete the second property. Given that $750,000 has already been used on purchase and planning costs, the build budget is then $170,000, enough for say a 120m2, 2 or 3 br dwelling.

At completion, borrowings would be $740,000, you will have increased your equity from $180,000 to $410,000 and have additional depreciation benefits (from a new building) to offset some of the tax payable on $170,000 pa. Some entity and structure engineering should see most of the debt reside with the IP.

Firstly, all the best in getting back on your feet (no pun intended!).
As others have pointed out, you have what is perhaps a "once in a lifetime opportunity" to set yourself up financially, so be aware of the risks as well as the rewards. In your position I would probably consider investing $200,000 at 50% LVR into an investment property and enjoy a holiday. Once you've had a break and got your head around being a property owner and landlord (and the property is showing regular income) you can have a look at investing in a second IP using the equity, or perhaps consider purchasing a PPOR. In any case take it easy, get good advice, and put your money where it can work for you.

Dale,

Perhaps look at finding an IP that is cash flow positive (you'll see from other posts that this is possible) as the rent you collect  will become part of the servicing equation. Correct me if I'm on the wrong track, but I think Richard is suggesting splitting the deposit monies over two IPs, maybe $35,000 as your equity contribution in each case. This seems like a good strategy, and again would benefit from cash flow positive property.

Hope you find a way.

Another option is to "bag" the walls with a sand and cement slurry applied with a broom. Then it can be painted over, or if you're adventurous use a light coloured sand and off white cement (with some waterproofer) and leave it.

Bagging is a bit "rustic" but it's also cheap and effective. I believe the term came from the practice of using hessian bags to apply the sand and cement.

Property can be bought in partnership in a variety of ways, and the "best way" is usually a function of your intentions, be they investing, trading, developing, improving etc. Whatever entity structure you use, you need to be sure to document the plan and the roles each of you have.

One method you didn't consider in your post is a simple Tenants in Common arrangement whereby parts, or shares, in the property are held by the owners in relation to the ratio of ownership. For example you might own 1 of 4 shares and your friend/business partner owns 3 of 4 shares, or you might own 1 of 2 shares each.

As for extracting equity from your property, there are brokers who can advise you on the best approach for this strategy, but my own experience is that it's not as easy is it was!

Good luck with your plan.

Should I be looking to buy up small cars – I note they're plentiful!
You're right in suggesting that inflation will drive up prices for all assets, goods and services. The issue for those looking for property – as an investor – is to keep ahead of that inflationary curve, and produce some income.

Thanks for the compliments on the web-site. Yes, I want to be part of the get-together in Melbourne (as an investor, not a consultant!) but haven't received anything more on the email. What's the go with time and place?

Estimating the cost of a renovation is notoriously difficult, but also very important. In the context of an investment, it may be a good idea to first establish a budget befitting the investment value, and then applying that budget to the renovation. In taking that approach you can at least inform your designer/architect/builder of your budgetary constraints in move your planned renovation in the right direction. This should shift your focus towards the highest priority/most important issues.

Most new estates, and some older ones, have single dwelling covenants. These are extraordinarily difficult to get rid of. You can find out if a property is affected by a covenant by doing a search of the property title. As ever, DWolfe has given some good advice, that is to say most of the desirable areas for sub-division are the older established areas that are being progressively infilled.