always interest only with offset account.  remove the idea of paying off the principal and replace it with the concept of filling the offset account with money up to the value of the principal.  that way you'd eventually pay no interest, and the cash would be in the offset either to one day pay off the principal, or pull it back out again and sink it into a separate property.  you can't do this if you paid down the actual loan itself.  you'd have to refinance and pay all the associated fees to do so, which adds up.

… and when you are ready to buy, track down Richard Taylor.  Username Qlds007 on this forum.  Very knowledgeable broker.  He'll make sure you get the loan structure right

You can buy a property without doing a course and without paying a buyers agent   If your bank needs you to pitch in a 20% deposit plus stamp duty, then you're going to be needing $75k to get started on a property worth $300k.  Less if prepared to pay a lower deposit and pay LMI (lenders mortgage insurance). 

Have you had a read of Australian Property Investor magazine?  The tables at the back of the mag will help you choose a suburb that has solid capital growth (aim for minimum 7% per year on average over 10 years), good rental return (aim for 5%+), and low vacancy rates (stay below 3%).

Once you've chosen a suburb, monitor the buy and rent sections of http://www.realestate.com.au for a month or two, and go to all the open for inspections.  That will help you understand what costs what in the area, and what is overpriced.  It'll also help you see how long rentals take to "fly off the books".

where do you fit into the equation?  architect?

$75k will cover the deposit and stamp duty on a property worth $300k.  If you are after a house, and are looking in the west, take a look at Laverton.  It's bang next to a zone 1 train station.  Also there is the suburbs of Geelong where demand is strong.  If you're after a unit, there will be more areas you can consider.

Hi Intrigue

I think it is really important to remember that when you have an IP, you need a spare wad of cash in case you have to wait for a tenant, or worse, if you have a problem tenant that stops paying rent and it takes a while to get them out.  Any time you need to make an insurance claim for damages by the tenant will always leave you a little out of pocket too.   Generally go by the rule of thumb that you should have a slushy fund to cover 6 months worth of IP mortgage payments, even when the property is tenanted.  The IP would of course be on an interest only loan with an offset account…. a property worth $200k would require a slushy fund of about $8k just for the mortgage.  Then there are council rates, insurance, water bills.  So you're looking at needing about $10k "just in case" money sitting in an offset account.  Which in your case means in the offset against your PPOR, since it is better to minimise this non-deductible debt.

Would you be looking at getting income protection insurance?

Hi Intrigue

Welcome!

There will be an abundance of ideas … are you ok with sharing a few more details to help us understand your situation and criteria? 

Here are some things that will help us help you:

– How much cash you have in your bank account ready to invest with
– Whether the property you plan to buy is going to have a tenant in it, or will you be living in it
– Whether you are eligible for the First Home Buyers grant
– Which state do you live in (and town if you don't mind telling us that… helps us identify suitable areas for investment around you)
– Whether you own your own place at the moment, what you bought it for and how much is still owing on the loan (or perhaps you rent??  or live at home??  if you rent, is it an option to live with your parents for a while to save some money?)
– The current balance of your super fund (bet you didn't know you could open your own super fund, transfer that cash in there and use it to buy property….)
– Annual gross salary
– Any current debts and how much you have pay off them per month
– Your monthly cost of living
– Whether or not you've spoken to a bank or financier and if so, how much did they say they would loan to you?

Answer none or some or all of these questions depending on your comfort level.  Any answers will help us get an idea of how to help out.

Looking forward to offering some ideas

Hi Nicole – a great response from you in my opinion.  Very relevant and full of info specific to the area.  I'd imagine tgavin71 will be grateful

I wouldn't be focussing quite so much on the fact that this money pit is in a great area – perhaps it is clouding your judgement.  Do the numbers first.  What is the pricetag of the property, and what is the estimated cost of repairing it to bring it up to a great standard.  And assume there will be a cost blowout.

Let's say the pricetag is $150k to buy it, and $80k to fix it, with $20k "oops didn't realise that needed doing" money.  That brings you to $250k.  If you could have bought a similar property without problems for a similar price, I either wouldn't go near it, or would offer a price WELL BELOW $150k for it, and use your building inspector report as your justification.

Don't forget to factor in holding costs in your equation (in this case – the cost of you living elsewhere while the fixing work is undertaken)

How dare you think about leaving us!