20 Years ago I was in  Noosa QLD and I was walking past a real estate agents office when someone came out asking if I wanted to buy land at the back of Noosa on a man made water canal. Me in my stupid mind set was worried about the mowing of the lawn as I lived interstate in Victoria. I think they wanted $15,000 for it and I reckon it would be worth over $1,000,000 now that you can't buy on man made canals anymore.

You need to plan  backwards.
For example
In twenty years time we (you and life partner) want to earn as passive income $200,000 a year and based on a yield of 5% we would need to accumulate $4 million in property equity by twenty years time.
$200,000 in twenty years is most likely be about $110,000 a year in today's figures using 3% inflation

Not easy to do.

• Always check the local value of property in the area. (these adverts may target out of state buyers)
• Ask local council  and other real estate agents if any issues like having a buffer zone because the property floods.
• Or having a methane gas leak  (old rubbish tip) or a chemical waste dump site next door to housing estate.
• As you may be paying extra for sales commission and developers commission.
• Do not rely on their solicitor or their valuer get independent advice and services.
• If they will not give you the interest rate and term of any finance they are offering to you be suspect of deal.
• Check if any roads/ train lines are planned to go through property in question in the future.
• At the very least of due diligence Google Map the site to see what street looks like and as I noticed in Mooropna Vic on a block of land that the land was right next to a dry river bed which I would assume is now possibly flooding over the site I was looking at due the recent flooding in the area.
• Check likely flood zones as land might flood

(if they start kicking up a fuss over you going to get  independent advice – become suspect on the deal)

• As Neil Jenman says DON'T SIGN ANYTHING until you get independent legal advice.
• If the returns are too good to be true they probably are too good to be true.
• Rental Guarantee's can be paid for by inflated purchase prices
• Be wary of mezzanine finance deals see http://www.investopedia.com/terms/m/mezzaninefinancing.asp

You may wish to read Neil's book called DON'T SIGN ANYTHING to get an idea of what can happen.

Yes – You could take $100k and compound it at 3% each year or FV=PV(1+0.03)^10 and subtract this increase from the 6.5% amount in ten years time.
You would pay tax each year from the 6.5% interest thus reducing your interest from cash even more.
year one $100,000 * 6.5% = 6500 then subtract say 30% in tax  approx $1950 equals 4550
Year two $104,550 * 6.5% = 6795 then subtract say 30% in tax approx $2038 equals 4757
year three $109.307 * 6.5% = 7104 then subtract say 30% in tax approx $2131 equals 4973
Notice that the tax payable increases each year so it makes it not a good investment and does not
take into account the CPI inflation which is why I do not save money.

You need to reduce the capital gain by 50% if owned for more than 12 months I think indexation was a lot fairer for long term investments as the CPI was taken into account  but it no longer applies after 1999 I think.
What you need to work out is the cash flow loss each year  plus the 3% for CPI
Expenses – Rent = cash loss
You have to make a gain of this each year to just break even now you need to take into account the CGT .
I worked it out to 7.1% capital gain each year to break even taking 3% CPI and 4500 a year cash loss .
Based on rental yield of 4% on a loan of 100,000
at 6.5% interest and capital gains tax of 30%
If you can pay off the loan quicker you can get ahead of the interest costs

No that is too simple
If you are making the same P & I repayment then you get a compounding effect
and end up paying more off the loan as each repayment bites more into the principle owing.
So yes interest rate saved could be 7000 but the repayment is a saving as well

one worrying factor for me is that interest rates are not just determined by the RBA anymore and as off shore money is costing the banks more to borrow the banks could pass this extra cost on to borrowers rather than absorb it.

If you leave funds in the offset account you have the option to use it later if things go bad in the market.
You need to work out how much risk you can tolerate.

And work out what if you lost a tenant for 3 – 4 months how would you manage.
if interest rates increased to 10.5% how would you manage.
How stable is your employment and how would you manage if you lost your job.

june 2003 140k to April 2008 Assuming was PPOR
2003 – 180 day approx
2004 – 364 days approx
2005 – 364 days approx
2006 – 364 days approx
2007 – 364 days approx
2008 – 93  days approx to April
Add up days = 1729 days ppor use
April 2008 – 2009 – 271days
         2009 – 2010 – 364 days approx
         2010 – now – 240 days approx
total rental days = 875
875 / 875 +1729 = .336 of capital gain taxable
140 k * .336 =47k that is taxable
divide by 2 as over twelve months ownership
23.5 k taxable gain
if joint owned 1/2 again (and add to each assessable income)
add to yearly income
calculate tax based on what marginal tax bracket the addition pushes total assessable income to.

should we pay it out or most of it and use it as a tax write off?
Do not understand how paying out a loan is a tax write off

There is a system I saw where you fill a plastic bag with a fence post and sand and seal the top with silicone and cement it into the ground. When you want to remove the post you break the silicone and suck out the sand with a vacuum cleaner.

Thanks for the great tip I would have used a car or a dingo. Your method is much better.

Go to the local council and ask them what you can achieve on the property in question before you doing anything !

You may be able to use a right to buy option contract and then subdivide the block and on sell the sub divided block to a buyer
                                            but there is risk involved
You risk losing the premium you pay to the original seller for the rights option if you do not buy it or can't on sell.
You risk of losing money on the sub divide costs unless you draw up a contract that if the rights issue fails you get back the costs involved in sub dividing the block when the original owner sells the sub divided block.
You need to employ a surveyor
You may need to employ a designer or architect to draw up plans for a suitable dwelling to get sub division, however you are creating a instant development site for the on sell to the developer buyer.
An options contract of at least 12 months may be needed to allow for council delays in approving the Development Application.
You need to get a good property law lawyer to do a buy option contract.
A letter of intent may be a way to approach the vendor with a proposal.
Find out what the vendor needs. Then you can work out what negotiation may suit the vendor !
Go to the local council and ask them what you can achieve on the property in question before you doing anything !

The wider bodied planes are a problem on take off. The noise is thunderous where as the normal jets is not so bad.
If you are in line with the runway that runs over Botany road.
I do not live there but stayed in an apartment that was in line with the runway for a couple of days.

Come to the next APN meeting and you can meet a Mortgage Broker.

http://www.activepropertynetwork.com.au/melbourne.html

Or read link and Neil's details are on the web page.