Really good article thanks Mark – very helpful.

I think it answers my question.. I need
 "1.25 times the interest rate (ie if interest rates are 8%, then the total return is 10%)"

Soo, if I understand correctly I want the rental income to come close to covering the cost of borrowing (interest amount) and I then need a say 2-3% pa growth rate? If my rental income was less than the cost of borrowing I would need greater annual capital growth to hold my own. Is that right, sounds so simple like that!

Thanks very much Tracy B, quick question if I were to nominate my financial institution eg NAB but during the time frame I get a broker to do a check to see if I can get a better deal.. would it be a problem if I chose a financier other than the one I nominated in the contract..?

Is it better to just say finance satisfactory to the buyer?

Yer, thats what's so hard when you are dealing with RE agents, who knows? They say nothing!

I appreciate all of your comments, it has given me much to ponder over the day. Thank you for your time and interest.

I have done some digging around and find that some use all sorts of unusual clauses that arent quantifiable effectively giving them the appropriate out if need be. (I believe in the old days people just used the finance clause but it seems solicitors have fixed that loop).

The more I think though the more I believe in a due diligence period (agreed I could shorten it a little). I actually cant work out why this is not used in residential contracts more often, after all that is what people are doing so why disguise it in a finance or building and pest clause and risk the fact you will be called on it. (sure we all do due diligence before contract but I can bet your level of detail and concern changes once the contract is signed)

The vendor is a public trustee so I am sure they know all too well about due dilegence and understand the challenges they face selling an old home. Surely a conditional contract is better than no contract, particularly if there is no one looking at the property. And is there really any difference between a due dilegence and a finance clause (both mean the seller does not know its a concrete deal until a certain date).

And just the same as they may not be desperate to sell (although I am sure they are sick of it being on their books for over 6 months) I am not desperate to buy. I only want to buy if the property and the yield stack up, otherwise happy to walk away. (I actually believe I may be able to purchase the home in 6 months time for less – that our market at the moment) So why would I bend over to satisfy the needs of the seller. I believe I hold just as many cards as he.. takes both parties to do the deal! he is nothing without me… ha ha ha ha ha

Is this not true?

I dont mean to be obnoxious, I realise that my challenging comments can sometimes be perceived as arrogant (suck eggs type) but I wish to explain I need to challenge to learn (havent yet found a better way). I am grateful for those who challenge my thoughts and allow me to understand different perspectives.

The thing that worries me here in QLD is that it is not the vendors solicitor that prepares the contract of sale it is the vendors realestate agent (an no disrespect but their legal knowledge is often limited and their desire for commission can outweigh ensuring all parties understand their options). The agent wants me to submit a signed contract offer (that he/she prepares) the vendor if happy with it signs it an we are in a binding agreement without any solicitor having set eyes on it…

Thanks to both of you.

To answer a couple of your questions Scott No Mates, the property has been on the market for over 6 months. It is in the hands of the public trustee. It has already had 4 price reductions and the agent tells me there is no intention to ever go to auction (not sure why but thats what was said). I am not feeling a great deal of urgency and thus do not see need for any waiving of cooling off etc.

I was allowing 30 days because in north QLD here things can move a little slowly and I could not be sure that I could get all inspections done in 5 days. It can take weeks to get someone to do the inspections!

Okay I have inspected the home and I quite like it. The agent told me that the roof is okay providing it is not damanged and that often people that may be concerned have them paint sealed?

So I guess I am thinking that I don't have to immediately change the roof and it seems the current tenant don't care but I will need to factor in the cost of change in future.

What sort of money would I be talking.. I believe a new roof would be in the are of $7k – $10k but how much extra does it cost for all the specialty removal and disposal etc?

Also any views on 2 beds for rental property investment. My critieria had previously specified 3 bed however the price on this might be right so I am feeling swayed.

Bump, I slipped out of the headlines way too quick, anyone got any suggetions. ta