Hi Peter

Where is your current property located?  The new property is one to live in or to rent out?

What you can buy will of course depend on how much equity you have in your current property (ie its current market value minus the debt on it), and how much you have in cold hard cash to put towards the second property.  It will also depend on your income, which will dictate your serviceability for a loan.

The general rule is that the land is king, as it is what goes up in value, not the dwelling.  For this reason, houses are preferable, or second to that, villa units. 

The golden rules are generally – close to transport (ie train station), but not too close to the rail line.  Close to schools.  Close to shops.  Within reasonable commute of Melbourne CBD.  Close to the ocean if at all possible. 

Another golden rule is to follow the infrastructure.  ie build where new infrastructure is going in (rail stations, freeways, shopping centres etc).

If they are free, go along!  You might well learn something useful.

Well ultimately, it's about what brings you the most return.  Two smaller blocks tend to produce a better sale price than one large one.  However, you'd need to look at sale prices of such blocks in your area and the costs of subdivision (council can guide you) and decide from there.  In addition to this, you need to understand the demand in the area.  No point trying to offload small blocks if nobody wants them, for instance.

Hi Coasta

The terms of interest to you will be as follows:

"Negative gearing" .  Think of it like this: an investment property earns income (ie the rent).  But it has costs (loan interest, insurance, council rates etc).  If, overall, the investment property makes a loss, some of the losses can be recouped on your tax return by means of clawing back tax already paid on your day job.  You won't get losses back dollar for dollar, but you can get some back.  Take a look on google for "negative gearing" to read up on the topic.

The other term is "depreciation".  Everything in a house or dwelling ages with time.  In other words, it depreciates.  A surveyor can put together a depreciation schedule to include all relevant items from the structure itself to the carpets etc.  You are entitled to a tax deduction as per the depreciation schedule.

If it is known that your investment property will make a loss, it is possible to get your accountant to help you put together a case to submit to the ATO, who in turn can provide a letter for your employer asking they deduct less tax from your pay each week.  That way you don't have to wait till the end of the financial year for your refund.  You need to be careful with this, and have spare cash in the kitty in case the calcs turn out to be a bit out.

You will definitely need body corporate approval to change the appearance or structure of the exterior.  This would include, for instance, if you wanted to paint the exterior, add a feature to it, or install an airconditioning unit that meant a cable or box would be visible on the exterior of the building.

You should not require their permission to change your carpet!  (Though if intending to do interior work such as plumbing, it'd be best to run it by them as this may fall under something they should handle).

re land; You own the land  your unit stands on (easy to see in the case of a unit, harder for an apartment since there are many storeys worth of apartments all sharing the land), and a share of the common parts.  Annoyingly you will be stuck with paying body corporate fees each year.

This document is a good read; pages 9 and 10 will be of particular interest to you.
http://www.consumer.vic.gov.au/CA256902000FE154/Lookup/CAV_Publications_Building_Renovation/$file/bodycorpinfo.pdf

Really informative post duckster – I think many people will benefit from it

I think your main question is about Capital Gains Tax, which is commonly referred to on forums as CGT.  Here is the link to the ATO intro to CGT: http://www.ato.gov.au/corporate/content.asp?doc=/content/00208572.htm&pc=001/001/038/001

Capital Gains Tax is a tax on the profit you make when selling property.  Your main residence is exempt from this tax. 

If you have an investment property you want to sell, it will be subject to capital gains tax.  There is a discount if you've held the property for at least 12 months (http://www.ato.gov.au/businesses/content.asp?doc=/content/18427.htm).

But seriously, why would you sell it?  When you buy a property, you'll have to fork out probably at least $20 in costs (solicitors, stamp duty…)… if you sell and re-invest your money elsewhere, you firstly pay CGT, and then you have to pay stamp duty – AGAIN!.  The golden rule is never sell.  Instead you'd perhaps talk to the bank about refinancing a property in order to free some of the money you've got in it to put the money elsewhere.

Here is the link to the section on the ATO website that helps you work out if CGT is payable on a property, and if so, how much.

Perhaps you were told this by people that don't invest in property

I'm currently trying to get my head around whether to buy investment properties in a trust, or in my own name.  Is it the case that I need only concern myself with trust if I was in a "particularly litigous profession" as described above?  Or are people finding it's best to buy all IPs in trusts? 

I'm merely aware of the cost of setting one up, and having its accounts done each year.  Don't want to cause myself more hassle and cost if it is not necessary.

Welcoming everyone's thoughts and experience!

Not knowing where you will be travelling, 6 months is still a decent block of time – and I assume you don't have a job to come back to.  So I'd set $30k or so aside for travelling expenses and getting set back up in Oz when you return.

One option is to buy two properties on Interest Only loans, throwing $125k at each (some of which will be eaten by stamp duty).  The tenant's rent should pay the mortgage easily.  Any spare cash should sit in an offset account holding the interest down, yet readily accessible if the need arises.

Then again – maybe you are eligible for the First Home Owner grant.  So perhaps the other option is to buy something for yourself, with the solid intention of living in it for 6 months, then moving out and putting tenants in it.  In this regard, you could secure a house before you go on holidays, but aim for a long settlement (ie avoid settling while you are overseas).  Still put down a small deposit, but again – put all the rest of the cash in the offset account.