See if you can get a really long settlement!  That way you will not have to come up with the cash till later.  Wink wink.

Something that is important to remember is that you don't have to invest in the major cities if you don't want to.  It's not the only way to wealth creation.  Don't let anyone tell you any differently.  As you point out, if you can't afford to make up the difference between the rent and the mortgage, the plan ain't going to work anyway.

I will however encourage you to read up on "depreciation schedules" if you haven't already.  Basically the building, carpets etc depreciate over time, and a quantity surveyor can produce a depreciation schedule to give to your accountant that will result in tax refunds for the next bunch of years, which often converts a property that is "bleeding money" into a property that is NOT bleeding money.  Generally you'd be after something as new as possible, as the depreciation benefits are higher.

All that said, there is infrastructure coming Ballarat's way (I believe a new train line so the Ballarat folk commuting to Melbourne do not have to share a line with the Melbourne Metro trains….. check on this, it's something I've heard on the grapevine).  And it is always to invest by means of leveraging new infrastructure that makes an area more convenient to live in.  It is also intended that Ballarat will become a satellite city, since as the Melbourne population explodes, sooner or later it will not be possible to ferry everyone into Melbourne each day for work.  So some people will be ferried to Ballarat and Geelong, which will have major employment centres.

I'm all over Geelong at the moment, leveraging new freeways, train services, and the forthcoming upgrade of Avalon Airport to become an international airport.  Ballarat is next on my list.  I'm thinking 2 bedders close to the hospital and unis, so that rentability will always be there.

How many "loans" are to be set up to achieve this?  My preferred way would be "one small loan" (known as a second mortgage, I believe) against the equity of your home to cover deposit, stamp duty and legals.  Then a separate loan for the remaining portion of the property purchase.  This means that you'll be able to clear the smaller loan earlier if you wish, thus freeing up your main residence from the emcumbering debt. 

Basically you want to minimise or avoid something called cross-colateralisation.  The banks love to cross colateralise your property such that they get as much of it as possible if something goes wrong. 

Let's say you suddenly find yourselves unable to pay the loan on your investment property and the bank decides to take it from you.  You don't want them taking your main residence as well.

Have you organised your loan yet?  Richard Taylor (userid Qlds007 on this forum) is an excellent broker that would structure things beautifully for you.  His website is:
 http://www.tayloredfinancialsolutions.com.au/index.php?option=com_contact&view=contact&id=1&Itemid=79

Scroll to the top right corner of the screen.  Click on "My InBox".

You know…. this year is not the only year left in your lifetime that you will be able to move residence and/or invest.  I agree with Angelina.  Sometimes you need to ponder whether you really want to add extra stress onto yourself.  An upgraded house or an extra investment property will be of no use to you if you kill yourself from stress.  Also remember that financial pressures are big contributors to marital stress.  Perhaps this year is not the time to do it.

And here is my 10c worth… WHEN are they going to invent pvc slat venetians that present a different colour from the outside than the inside?  Generally from the inside, you want white.  Makes the place brighter and seem bigger.  But from the outside, you often want the light-coloured timber look.

Go for the venetians with 50mm slats.  I think they look much nicer.  You could go timber or pvc.  Pvc are much cheaper and will not warp if they get wet.  So excellent for bathrooms and so forth.  Bunnings sells both, and you can install them yourself.

ps, please tell me you intend to take out public liability insurance etc for this sole tradership?

In general it would be handy to know why the owners are selling, so you can find out if they are in a hurry to sell (eg have already bought their replacement house and need the cash), need to sell (little old lady needs cash to buy into a nursing home unit), hate the house and just want to be rid of it (divorce – don't want the memories associated with the house)……

Try to find out, without directly asking "why are they selling?"

Get yourself into a nice conversation about the weather or nearby beach activities or whatever,…. some kind of appropriate natural lead-up to "and are they moving to somewhere nice?"  or something to that effect.  And then couple that with "Oh, lovely, lucky them – when do they move there?"  You ought to get an answer that tells you if they've already moved in, or have been forced to tenant the new house till the old house is sold, or whatever.  It might also tell you if they are building a new place, and it is not ready yet.  In that regard, you could make an offer that agrees that settlement date is not until just after their new house is ready.  This is because you'll save the owners from moving to a temporary residence while they wait for their newbuild to complete.  Often people will lower their price a little for this convenience. 

If you see lots of family photos about, you could say something like "they look like lovely happy people – they look happy here – why are they moving?" 

Weigh up this information – the answers could tell you that the vendors might accept a lower price just to be rid of the place, or if the timing of the settlement is convenient.

I hear ya sister!  I'm surprised the police haven't turned up to arrest me for the verbal abuse I've been provoked into hurling at Telstra. 

Don't worry about the not knowing about the offset account thing.  I didn't know either!  Took reading about 30 books and millions of forum threads for the penny to drop.  Damn, I wish I had originally put my home loan on interest only with offset (cry cry cry).