I hazard a guess – if you have another property receiving rent as income you definitely could as it's part of yoru property investment activities.

Anyone knows otherwise?

Agree with KiwiPropertyGuy. I believe you will NOT regret too.

If you have enough income to cover another 2% hike in interest, there's no reason to sell.

There's a small chance prices will drop after FHOG ends, but the way I see it, there's a bigger chance of them rising in the near future (my personal view is entry level prices will drop just a fraction and upgraders market (650k+) will rise disproportionately more in comparison – that's Sydney tho).

The current interest rate is an emergency setting. The market sentiment is that the rate will rise soon, and potentially quickly. At present some econmists are poised at 2% extra by the end of 2010.

If sleep-at-night factor is crucial to  your decision (why gear all of them so much to start with I might ask – but that's another discussion), I'd do a detail cashflow analysis of your current situation, with interest rate being 2% higher than today's. If that outlook makes you sweat, I'd sell the one house that has the least potential of capital gains, or the cheapest one in the entry level market. I know people advocate "never sell", but if you're constantly worrying about day-to-day cashflow, it's not very healthy (especially if you're expecting a new member in the family). I'd rather invest less slowly (you still have 2 houses), and be able to enjoy my time with the people I love most in life. (unless both of you have immense appetite for risk which doesn't seem to be the case)

There's no free lunch. If you want something, you've got to pay for it. Sleep-at-night and miss out on potential hike in prices, or cut back on living expenses if you can and ride out the storm (which could be many years).

But I guess you already know all this.

p.s. I think FHOG only get scaled back at the end of Sept, it doesn't end there. The original FHOG will always be in place. I feel that you're over estimating the impact (of prices collapsing) of the imminent 30/9 scale-back event.

Just my personal view.

I would pay off the personal debt first unless you know for a fact that the property you mentioned is severely under valued (ie too big a bargain to pass up). I personally believe, for a house at this price range (entry level house), if it's in Mel/Syd/Brisbane, the prices are not going to change much over the next 6 months. Just my personal believe tho.

Pay off personal debt then work on an LOC facility against the IP. Use LOC to pay the deposit for your 2nd IP (not redraw from your residence's loan account).

Anyone has other idea?

Get an LOC on 80% of your house, buy as many properties as you can with enough equity to break-even (interest expense + rent income = 0, factoring in 2% rate rise). With the equity and cash you probably can buy 3 houses if not more (30% deposit on each).

1. property selection is important – buy only investment grade property
2. if you're new to investing in property, this exercise will take time. dont rush. If I were you, I'll buy one property at a time, and adjust my selection strategy along the way.

And then just wait comfortably until house prices go up enough, then formulate your next move.

I'm a risk taker. If I have what  you have, I'll buy 5 properties and negative gear this year. But then that will carry much higher risk. But hey… to be honest, with that equity and spare cash, I'll quit my job and trade/invest full time in both share and properties. (unless I really love my job and it pays me very well)

I'm learning too. Anyone see any problem with my hypothesis? Or am I being naive? I'm half way towards this scenario myself…

I believe this is generally a good strategy, assuming you still have a sizeable PPOR loan balance and your regular income can service the loan:

1. Pay off as much as you can on your PPOR.
2. Get a LOC against the equity you have on PPOR (your PPOR now has two loans mortgaged on it)
3. Use the LOC to fund new IP deposit+cost (so that all of its interest is deductible)
4. When you receive rent from IP also put all of that into PPOR loan first (assuming negative gear is beneficial)
5. Max out all loans to 80% of property whenever you need more fund or values have raised enough 

From tax saving point of view, your primary aim at this stage is to pay off your loan on PPOR completely, leaving only LOC. So at the end of the day, your maximum  available fund will come from the following (1) an LOC equivalent to 80% of your PPOR, and (2) Excess equity to 80% of IP, if needed.

Keep doing this until you retire from property investing…. then you can sell a few IP, pay off all laons, and live on the rest till death do you and your properties part..

Assuming the situation is as simple, I'd get a job first, unless I pursue option 3. A steady income just help so much with future IPs. $30k is not a lot to live on after funding a property. (again assuming situation is as simple)

Agent Rep (RE?) job seems quite flexible timewise and is perfect for you to learn about real estate at the same time. Why did you turn it down?   (rhetorical question)

Richard is spot on with LOC on PPOR. I'm financing a purchase entirely with the credit facility in LOC for deposit and costs. In other words, I use $0 of my own money to buy this house.