How generous to only help people saving for there first home rather than taking their greedy paws out of the measly half a percent per annum interest earned on most savings accounts. Now inflation is currently running at 4.3% p/a so really you are losing 3.8% in real terms before you are taxed.
What I find strange is MR Rudd can impose upper limits on the Baby Bonus and the Family B payments based on income
but doesn't impose a lower saving interest earned and share dividend threshold limit on taxing bank interest and share dividends so that a normal working family doesn't  have to chase around trying to find out that they earned less than $2 on their savings account or less than $500 on their dividends for the year.

Guess I will continue borrowing large sums of money rather than saving for a deposit for my next investment.

the whole crux is that when you fill out the tax form it will be asked for a net rental loss or a net rental profit.
So net rental profit/ loss = rental income – expenses (interest, council rates, repairs, water rates, insurance, borrowing costs over 5 years, depreciation,ect )

So if you end up with a net rental loss it is subtracted from your gross taxable income on your tax return. If you make a profit it is added to your gross taxable income.

You could ring the ATO to confirm this as they are always very helpful in helping to explain taxation to taxpayers
or check out this article on their web site
http://www.ato.gov.au/individuals/content.asp?doc=/content/31258.htm
or
check out this search page results
http://www.ato.gov.au/SearchResults.asp?si=001%2F002&kw=rental+expense&go.x=0&go.y=0&go=1

http://www.ato.gov.au/individuals/content.asp?doc=/content/00096828.htm
downloadable guide

You have to be careful renting to relatives as the tax`department has a requirement that some transactions are done at arms length rather than to close friends, relatives, ect.

I myself like the idea of  complete honesty / disclosure with {or do we advertise "vendor to lease back for 5 years"}
 it probably would work better if you had some agreement with a real estate agent for the rent agreement as you can then advertise what the rent income will be and that a bond will be paid. Another selling point could be to offer to pay the first 12 months of rent in advance.

I nearly did rent a property back to a vendor when I purchased a property but the selling real estate agent mucked up by taking too long to organise this rental agreement and they moved out.

It is similar to buying real estate with the tenant already in the house on a lease.

depends on if it was your primary place of residence with your wife.
If not capital gain tax has to be paid
The likely costs can be the selling commission to the real estate agent. Not sure on the percentage you would need to check see http://www.maggiethompson.ca/buysell.html#sell
or you could sell it yourself  see http://www.jenman.com.au/BS_S_No_Agent.php
Marketing costs up to $2000 for real estate agent to advertise property
Having to go to a police station and declare every thing in the selling contract is complete and sign a stat dec is a bit of a pain

if you are buying another property that is where costs come in also

It all depends on how long you want to wait. I purchased a house in 1995 in Cranbourne $76,000 it is worth approx $170,000 today. I purchased another one in Cranbourne in 2000 for $100,000 and sold it in 2004 for $170,000 but the market was really hot then. Both started out negative geared. one of the properties is positively geared and the other was sold as I had a period of 6 years without income due to two infants and a university degree. So I worked out I could not afford the $100,000 loan and paid it out via sale and reduced the debt on the lower loan.
Once the growth suburb fills with more houses the price will slowly increase over time. But one thing to think about is East Link changing the infrastructure of the area as the traffic at the moment is really heavy into Cranbourne and the S.E. growth suburbs.The problem is that while similar new houses are created in the suburb you have to compete with the new houses. Scarcity creates the price increase. In 1995 the honey moon rate was 7.6% and my interest rate went to 10.5% in 1996 and I couldn't increase the rent. Only recently has the rent increased by 69% compared with what I could rent it at in 1996.
What I have noticed is the property values roughly grow at 7% p.a. Now what happens is the price flattens out for 3 to 4 years and then the price rises in year 5, year 6 & year 7 by more than 7% to rates of 33% in some suburbs. But it averages out over ten years to the rate average of 7% p/a.
.So when the market is hot the rates of growth are amazing but when it slows like it has at the moment the growth looks non existent over the short term 0- 4 years.
So your third property is worth 40,000 more than the debt so if you sold it you would make at least $20,000 depends on selling cost / commission then if owed more than 12 months you 1/2 the gain taxable so $10,000 will be taxed so $4000 lost in tax based on 40% marginal tax rate.
So you have $16,000 that you could use to drop the debt on the first loan plus an additional $120 a week to put in as an extra payment on the first loan or to put in an offset account linked to the first loan due to you no longer having to fund the third negative property. Plus some breathing space.

When you have a low growth environment a debt reducing strategy is prudent with the goal of getting the debt down to a level where you create a cash flow neutral or cash flow positive investment. Then the positively gear property helps you pay for the negatively geared property and the equity helps secure a future loan when the market changes. (this technique is in Steve's book called Pin wheeling)

While you have a high growth environment & low interest environment you can use a high debt, interest only & high negative gearing strategy more effectively.

You do not want your PPOR linked to your investment loans. The reason is asset protection. The lender is saying it is not necessary probably because if the loan is with the same lender they can still take your PPOR if you fail to pay the investment loans.  You really need a separate loan with another lender for the PPOR and another lender for the investment loans.
 It also is in the interest of the lender to co-lateralise as much security as possible against the loans.
If they are separate loans you could still have a house to live in if the investment loans need to be foreclosed.

So you would be paying off the principal amount of this loan.  With a weekly expense of around  $330  a week  based on 8%  interest rate and annual costs of $2000. With $210 in rent you are negative about $120 a week.  Based on a 30%  tax rate  on your wage you can claim  $36  a week.  Depends on your tax rate on your marginal rate of tax !. So you spend $120 a week to get a tax saving of $36. What fact is missing-  is what does the property's capital growth rate increase by each year. Usually negative geared properties experience more capital growth than positive geared properties.  Property is not  a get rich quick scheme it takes time. As  an example if  you could  either make  more  payments  off the loan and reduce the loan to $110,000 you now have a positive investment. If you had an offset account you could save up to $80,000 and have the amount reduced for the interest calculation for your loan – check with the bank! .
Also rents have been increasing lately. Has your rent been increased lately ?. Now if your property grows at 5% a year in capital growth in 5 years time your house would be worth $280,000 that is $50,000 capital growth while paying off the loan at the same time.
If you sell you pay capital gains tax, real estate seller commission and stamp duty to buy the next property .
While living a home you can save money to reduce the loan or build up a deposit in an offset account to reduce interest on the investment loan.
A small increase in your repayments may seem like it is not paying off your loan but over 20 years that extra payment has a compounding effect. Say you managed an extra $40 a week that is $2000 a year for 3 years $6000 over 20 years that is a saving of approx $8000 in interest at 7% without taking the compounding effect into account.
If you can get the loan down you can eventually have an investment property that costs you nothing to hold.
Positive geared houses are much harder to find to purchase.!

It is an amazing situation when you can only claim back the marginal tax rate of the negative gearing, So you lose 70% to gain say 30%. Then if you happen to make a capital gain this will be deemed as income by centre link even though a capital loss is not seen as a loss of income.

You cannot rely on the advertised price range at all. It all depends on who turns up to the auction and how much money they are prepared to pay. An auction can be an emotionally controlled event and if the market is hot the prices can be crazy. It can really be pot luck. I went to an auction a couple of months ago for a new unit development near where I live and there was one bidder. It was quite funny when the Auctioneer asked the bidder to increase their bid to try and put the unit on the market. The bidder refused and when the Auctioneer asked why the bidder said he wasn't prepared to bid against himself. So in this situation the bidder gets first rights to negotiate with the seller if the property doesn't reach the reserve price.

Peter Spann books are found at
http://www.peterspann.com.au/books.html

Other books of interest
http://www.businessmall.com.au/store/listCategoriesAndProducts.shop?idCategory=9

check out
http://www.businessmall.com.au/store/viewItem.shop?idProduct=10

http://www.businessmall.com.au/store/viewItem.shop?idProduct=5

http://www.businessmall.com.au/store/viewItem.shop?idProduct=143