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Terryw – I had no idea that would be the case. So just for my own understanding, even if I wanted to use the equity on my own my sister would still have to agree and be on the loan. That's a pain, she has no interest in investing.
Thanks for the replies.
Given my potential issues with serviceability and low borrowing capacity, would it be more worthwhile to:
1) Look for a property in a lower-priced area to improve to increase both rental income & capital gain. The problem here is I am a little worried about the potential issues with dodgy tenants in these cheaper areas (though being careful about choosing tenants and having a good property manager would help here).
2) Look for a cheap apartment in the inner city. I notice that rental yields are fairly high, but I'm thinking capital gains would be much lower.
Hopefully over the medium term I will be able to secure a better job which will bring in more income. Given I am looking mainly for growth in equity rather than immediate income, option 1 makes more sense to me. It would also help when looking to buy more properties in the future.