1. Look carefully at the size of the apartments. Most lenders are reluctant to lend on anything under 50 sq/m.

2. Your income will be factored into the servicability of the loan/s. You said you wanted to "sell one or two (based on how many the bank allows me to obtain) in 6 to 12 months time and use capital gains to feed into the others". How many do you expect to buy in one year, and how do you know you'll get this wonderful cap growth so much that it will give you enough to pay down a decent chunk of the remaining debt after such a short time as 6 or 12 months? That is very ambitious. 

3. If you sell before 12 months, you will pay capital gains tax on 100% of the capital gain, if you sell after 12 months you will pay cgt on 50% of the gain. You may make no money at all if the cap gain is small, and most likely will be in only 6-12 months.

4. Apartments, especially smaller ones like studios, have very little "on-paper" deductions. less tax benefits.

5. How do you work out that they are cashflow positive? Allow for around 15-20% of the rent to be eaten up by holding costs such as insurance, property management, body corp fees, maintenance, vacancies (allow 4 weeks per year).

6. There are also purchase costs, which are typically around 6% of the purchase price.

7. Limited add value potential, unless they are rundown and need to be renovated – more funds required. Allow $5k minimum. This may not be reflected in increased value of property either. ie: $5k spent, value increases by only $5k or so. This happens a lot.

So, a quick number crunch for you:

Purchase price: $160k, + purchase costs: $9,600  = $169,600k. Say: $169k.
Deposit: $12k + $7k (FHOG – or is it more than $7k now?) = $19k.

If you take a normal 80% loan, you will need a deposit of: $41,000 (Including purchase costs). You are $21k short. How will you fund the shortfall?

You could take out a loan for up to 95% of the purchase price, but you will then have to pay Loan Mortgage Insurance of around 1% of the Purchase price = $153,600 loan. This is a very exposed position in my opinion and I would not recommend it.

You will need to put in the remainder of $15,400 as a deposit. You have the $19k, but only use what you need and keep the remainder of cash for emergencies.

Assume you have taken the 95% loan including LMI, at 8% interest only because your deposit is too small.
The repayments are: $236 per week.
Assume the rent is at the upper end of your quoted range = $250 per week. (It will most probably be less; maximum rent will be for the best properties).

Take out 20% of rent for holding costs = $200 nett rent per week.

You have a negative cashflow of $50 per week before tax return. After tax you may be able to see a pos cashflow. Depends on your income tax marginal rate.

How many properties can you afford to hold at a neg $50 (or more) per week?

The best book I have ever seen for general money management skills and practices is:

"Money Secrets of the Rich" by John Burley.

Also look at all the Noel Whitaker books, they are excellent.

To be honest, if you are heavily in (consumer) debt, and are struggling to get out of it, then you need to totally change your mindset about finances before investing in property.

Property Investing is a business, and should be treated as such. Bad money habits and property investing is a recipe for disaster.

The reality is that the best run businesses have excellent finance practices.

The word finance is daunting for most people, but it is not that hard; most of it is changing you consumer habits and thinking like an investor.

For example; bottled water. Most people fork out for a $2.00 bottle with a brand name on it. It's just bloody water.

Go to the supermarket and refill your own bottles with the stuff from the big vending machines at a fraction of the price. If you can't do that; drink tap water – even cheaper, and you'll get used to the taste. More money saved for investing.

Another one: cars. A brand new car loses 20% value as soon as it drives off the yard. Never buy brand new. Buy at least 1 year old versions. You'll save thousands more for investing. My best friend buys a new car every 3 years. He's a total consumer. Usually around $50k . My investor mind says: "that's an IP deposit sitting there in the driveway".

Credit Cards; only ever have ONE, and pay off the entire balance every month. If you can't do that, cut it up.

And so on.

Keep the 3 bedrooms; most people want more bedrooms, not less.

Don't rent out the 3rd room while you are renovating unless you want to upset your tenant and they will move out.

First clue; painting and carpet/floorboards are last things to be done on the inside.

Do the landscaping absolutely last; especially if there are tradies stomping around doing their stuff. 

Maybe do the restumping first as this may cause small cracks in the walls which will need filling/sanding when the painting starts, and you want level floors for the new bathrooms and kitchen etc.

Then do the bathroom as you need the kitchen for the coffee and the beerfridge while you work.

The electrical stuff can be done anytime. I think from memory a power point/light switch is about $25 each? Start organising your lights and power point styles as soon as you like.

Start looking at display homes etc for ideas for the bathroom and kitchen decor as soon as you like.

Everything will take twice as long, and more dollars than you expect.

Kitchen and bathroom cabinets can take as long as 3 months to have made, depending on how busy they are, so get the designs sorted and order asap.

If it's going to be a rental, look at the possibility of using Ikea or Bunnings for their kitchens. They are quicker to deliver and install usually, and are adequate for a rental.

Don't go berserk with top quality for renters.

Selling the IP and using the profit to pay down the PPoR loan is not a failure.

If the cashflow is tight and the lifestyle sucks, there is no shame in bailing out for a while until the situation gets better.

The profit on the IP will give you automatic equity in the PPoR which can be used again later for another investment.

If you can hold off until maternity leave, your tax rate would be lower? and this is a good time to sell to minimise the cap gains tax.

Get in touch with a good accountant if you don't have one already, and work out a plan of action, and look into using the $25k in an offset account against your PPoR loan to minimise the interest. You'll still have access to the $25k in an emergency, but it's saving money. You'll need a Mortgage broker for this part of it.

Another option may be to move out of the PPoR and use it as an IP. All the expenses become tax deductible and if you move into a cheapy yourselves for a time, you may be able to create more cashflow your way. Then you could keep both properties.

You would need to see what sort of rent you could get for your place and work out with the accountant if the numbers would work.

We rent out our PPoR at the moment.

We use an agent, the fees are tax deductible at your marginal tax rate.

Money well spent, unless you are living closeby and have loads of time to deal with all the issues.
 
Make sure you take out Landlord's Insurance as well, and $20 mill public liability.

Talk with a Mortgage Broker, find out what your borrowing capacity and servicabilty figures would be, then start looking for areas that you can afford, have a decent rent return, and prospective cap growth.

A quick search of your price range on real estate.com.au or domain.com.au will give you a few places to start your searches.

Doc Spock,

That's a great result!

As Simon said; paying the smallest loan off first, while paying the monthly minimum on the others is the way to go., and cut up the credit cards.

Then, when that first debt is cleared, you use the freed up cash to pay off the next smallest loan along with its minimum monthly payment. You continue to keep paying the monthly minimum on the other loans, and so on. Seems like you've got the idea.

But here's the thing; your money-management habits up until now are what have gotten you into this mess. Investing in proeprty with this sort of pattern is courting disaster.

Property investing requires very good money-management skills; you need to treat your investing like a business owner and keep accurate records and learn to minimise expenses.

You past history does not follow this pattern. Good to see you have cleared a lot of the debt now, but a change of habits is required.

I would be looking to clear all this debt, and then get down to only one credit card with a very small limit; say – $500, and learn to discipline yourself to paying the entire amount off each month. basically; if you can't afford to pay cash for it, you don't buy it.

This is tough in today's society of spend, spend, spend.

But think about this; 95% of the population are broke. They are in debt, don't invest in anything. This includes many high income earners as well. True.

5% of the population are the opposite; they watch their spending; they are not concerned with what the Jones are doing (going broke, but appearing rich) and regularly invest in something.

A good rule of thumb is to allocate AT LEAST 10% of your income to investing. Can you do this after the debt is cleared? It's not easy, but how bad do you want to get rich?

$2200 is too much to pay in rent if you are serious about property investing. $500 a week? Are you kidding? That's ridiculous.

You can rent 2 bed apartments, actually; no – units with courtyards, for around $800 per month in every cap city.  You sound as though you are on your own? Get a 1 bed; even less. 

Sorry if these words seem harsh, but how much do you really want this? You said you have little money for a deposit? No wonder; it's all going in needless rent. No-one NEEDS to pay this much.

Do the hard yards, move to somewhere cheaper and start saving. It's not the ideal, or easiest solution, but it's what you have to do to get ahead, and get ahead quickly.

Doing a wrap could be the way to go, but without experience, it could be tricky. Speak to one of the MB's on this forum who does them – I think it's Simon Macks (sorry Simon if it's incorrect).

If you do buy through a business there are different tax scenarios; for example; if you sell, you would pay Cap Gains Tax on 100% of the gain, and at company tax rates.

When you buy individually you can sell (after 12 months) and pay CGT on only 50% of the gain, at your marginal tax rate for your taxable income.

If it is bought through the business, you also can't claim any of the IP expenses against any personal income tax if you have taxable income. So, you wil just be giving LapDance Kev and his mates free money.

You can transfer the property from your company name to your name, and vice verse, but you will have to pay stamp duty on the transfer as per an ordinary sale transaction. Could be expensive, and there is the CGT to consider as well.

Another thing to consider with buying through the company as opposed to buying in your own name is the CASHFLOW.

Assuming you don't have any taxable income, and all your income is through the business, then you only pay provisional tax after the end of the finacial year, correct?

It is very likely that you will be buying a neg geared property, with no tax benefits if it is bought through the company, other than the neg gearing will reduce your tax bill at the end of the year. You will still pay tax; just not as much.

In the meantime, you will be paying out MORE cashflow to hold the property through loan interest and other expenses. This can be a significant drain on your cashflow. 

And as you said; you have at the moment very little savings, and paying an exorbitent amount of rent. The situation would only worsen. The main reason for businesses failing is lack of cashflow.

You want to put yourself in a situation where, if you do invest in property, you are not going to jeopardise the business through lack of cashflow.

Yes, that's what it means.

For new investors, it is probably safer to buy in the area they know best; near where they live, but this is not necessarily a good area to invest.

With the use of internet, fax, email, phone you can research an area outside your own state quite easily.

It is better if you can visit the area, but things like demographics, rental yield, location, future developments which may affect cap growth etc, can all be done through the above.

The property will also need to have a building and pest inspection, and I have had 3 possible interstate purchases fall over because of bad building inspector's reports. You need to put clauses in the Contract of sale to cover these things. 

How can you get a loan for a US property from a US lender if you live in Aus, Nigel?

Or, do the investors obtain loans from Aus lenders for o/seas properties? Which lenders do that? Not many I'll bet; care to comment; any of the MB's on the forum?

Not that I want to do it; just curious.

Because we have been here for over 2 years, no debts, own everything, income of over $90k per year, and because we have no debt, we have no credit score. Have been with the same bank the whole time, and even they won't give us a credit card (we don't want one, but we applied just to see what they'd say). Threy would, however, give us a "secured" credit card. In other words, a debit card that needs funds in it, but the spending is treated like a credit card so you can get a credit score. Yeah.

We can't even get a department store credit card (don't want one of those either, but recently I bought a new jumper, and the check-out person said if I signed up for their store card I'd get another 40% off the price. I thought; what the hell; let's do it. I was knocked back in 2 mins by the voice on the phone from upstairs when the check-out person made the enquiry for sign-up.

No explanation, but I did get a letter in the mail from the store a week later saying I didn't have a good enough credit score to qualify for the card. read: NO credit score).

Good luck getting a housing loan.