Great work on the savings!  And the First Home Owner Grant will add a bit to that too.

Try and stick to a freestanding house or townhouse.  Failing that, go with a villa unit.  Try and avoid apartments if you can, since it's the land that has the value.

Where in Melbourne are you looking?  And second to that, what sort of work do you do, and in what suburb?  We might be able to suggest suitable suburbs to look at.  For instance, you might say "I'm keen to buy a mansion in Toorak" and we'll say wow, let's rethink that, you work in the CBD so realistically you could commute to work from as far out as the likes of Frankston or Melton.  Give us some details, we'd all love to help!

unhappydays –

I agree with maree.  What about instead thinking "how fortunate you are that there are people (ie landlords) prepared to take on mortgages in order to make rental accommodation available for those that do not have the means or desire to purchase their own homes?" 

Have you considered that your landlord might be in financial distress him/herself (maybe the landlord's family has a new baby on the way, or a family member is ill and requires an expensive operation and they have to sell this property), and you are making a bad situation worse by refusing to move on time, claiming you have "no option" but to stay?  I'm sure you have a friend or family member that could put you up for a week or so. 

Taking on a rental property as a tenant means you have the convenience of deciding you don't fancy living there and in turn leaving, without the burden of a mortgage to the tune of several hundreds of thousands of dollars.  But the tradeoff is that the landlord might need you to depart earlier than planned.

Just remember – it is not your property.  Never was.  You're renting it.

"A lot of apts have been built up in the recent few years"…..

You'd have to wonder whether this will create an oversupply problem.  That is, your inability to get tenants, or resell quickly for a fair price, if you are competing with heaps of other similar apartments…

… or convert lounge to master bedroom, leave existing bathroom as is, and convert part of the dining room into an ensuite.  Knock out interior walls of family rooms to make a big large space.

Hmm that could mean that if you bought the place, your prospective tenants would be people without cars which could largely be students and the unemployed.  Not ideal.

Fabulous thanks Trent!

Anyone know of a builder in VIC (Melbourne thru Geelong) ?

I am in VIC.  You absolutely need it.  Imagine if the current owner hasn't bothered to insure the property, and it burns down after you've paid a big deposit but before settlement.  Your solicitor will confirm that you absolutely need it.  It's a small price to pay compared to the massive loss you'd be facing if something went wrong.

This development plan of yours is the driver – the reason you are attempting to buy this apartment.  However.  Have you run the numbers on such a development?  Would it even make money?  If not, your motivation to buy this apartment might well disappear.

I'm not sure that re-developing already strata-d units would have enough margin in it.  Anyone with this experience care to comment?

Positive gearing, positive cashflow….

If the property is actually putting money in your pocket each week rather than taking from you (ie negative gearing), be sure there there is capital growth too.  At least 7% per annum.  The statistics in the rear pages of the Australian Property Investor Magazine can show you how various suburbs have performed each year on average over the last 10 years.  You really need the capital growth.  Can't stress that enough. 

You could loan against your home to fund the deposit on an investment property.

Did you also know you can start your own superfund (SMSF = Self Managed Super Fund) and use it to buy property?  And the banks will loan up to 80% of the buy price.  Nice!  If you and your husband are in your mid 40s, there is probably a decent amount in your superfunds, so it is worth looking at how much you have, and whether it is performing as well as a property would.

By the way, a slightly negative-geared place could actually become neutral or positively geared by means of a DEPRECIATION SCHEDULE.  A quantity surveyor prepares one.  Plenty of info on this forum about these.

Where will you live while you are renting it out for 2 years?  Will you rent elsewhere, or live with your parents? 

I'd like to point out the matter of capital gains tax.  You will have to pay some if you move tenants in from day one.  However.  If YOU move in on day one, thus establishing the property as your PPOR (primary place of residence), then move out, renting elsewhere, you have six years to move back into it, and your capital-gains-tax-free situation remains intact by means of the 6 year rule.