Hi again

I think we've said all we can say.  Personally I think it is a bad idea to buy this place. There is a reason it is hard to get finance for these places. 

Nobody was suggesting you buy it as a PPOR or even as an investment.  We were suggesting that if you want to live there badly, just rent there.  Buy something else that actually has capital growth, and whack a tenant in it.  And as for the FHOG: buy something (ideally not this place), live in it for 6 months to validate your right to the FHOG, and then move out.  Put tenants in it, and you can go live in an area you fancy – RENTING.  Remember, you don't have to be able to afford to BUY in an area in order to live there.  You can rent there.  I've heard quite a number of successful investors say that they consider it unwise to live in a property they own anyway.  This is because when you LIVE in your property, its expenses are not tax deductable

Good books – yes – you can download this one for free:
http://yourempire.com.au/#/book

Ah yes sorry matie.  I read demo as "demonstration" rather than "demolition"

Yep you can sell the land without the building permit.  You'd get a bit more for it if you had the permit, of course   You can get an idea of how much more by scanning land prices on http://www.domain.com.au

new_start … if you take a look at the contributions Terry makes to other threads you will see he knows his stuff and that his suggestions are made in the best interests of the person asking the question, not himself.   He's given you a pretty clear warning with his comment

"I think you are silly to buy a property that doesn't appreciate. There is no point. You might be better off by renting one and then investing the difference elsewhere."

That says pretty clearly that you'd be a fool to buy this place.  At the end of the day it is your money, but the advice you're getting in this thread suggests that your money would do far better being sunk into something else.

If you decide to buy it, be ready to be forced to live there forever as values of other properties get away from you at a pace your annual payrise cannot keep up with.

It really depends on the situation.  For instance, let's say the one with the 12% growth is in a town that exists only because of one company.  What if that company goes bust or shifts its premises elsewhere?  Jobs in the town would be wiped out, and noone would have reason to live there.  Then your house would be worth squat….

The big concern I see is; let's say you buy this place, and it appreciates far slower than other properties.  Then you have a situation change in your life – perhaps you'll get married and want to have a family and as such will require larger accommodation.  You could in theory refinance the flat, to pull some money out of it to sink into a house.  However if by that point, the value of the flat is tiny compared to that of a house, it may not be an option for you.  You may struggle to keep up with the property market in that regard.

Hi Emma

What are the legal requirements for such a residence?  For instance, in the UK, there is a requirement to install fire doors.

Maybe it might be an option for your mum to take out a loan against the equity of a small portion of her home – enough to build a granny flat in her backyard?  She could live in the granny flat and could rent the main residence out, and use the rental return as income. 

This site gives a bit of an idea of the price of putting a small residence in the backyard (assuming the backyard is big enough, and assuming council grants permission to do so) : http://www.backyardcabins.com.au/prices.html (note that things like bathroom and kitchen fitouts, lighting etc is EXTRA)

I would think that if she loaned $100k against her house to do this, then the rental return on main residence would see this loan paid off within 8 years.

This is just one idea, and you ought to seek your own advice from a professional who does not have a vested interest in whichever path you choose.

If it was my mum I wouldn't want her to do this either.  Just look at what is going on with the global markets right now.  It would be bad enough if that was your grocery money getting slaughtered… another thing altogether if you'd disposed of your house to buy into such a predicament, and then couldn't afford your rent money either. 

Something to look into is a reverse mortgage.  I do not know anyone that has such a mortgage, but it is worth a look.

Where is your mother planning to live if she sells the house?  Rented accommodation?  Or buy something smaller?  More importantly, WHERE is your mother's house?

Quite.  Well said DWolfe.  You are not obliged to do these people a favour and take their house off their hands.  I urge you to remember that one of the big strains on relationships these days is financial woes.  Don't introduce financial strain to your marriage by buying badly.  Forget about the needs of the vendor and think about your needs.