Prices do drop in Aus Neil;
realtors are good at spinning the market to beat it up. Always add a pinch of salt when talking to a realtor.
Historically, over the long term prices always go up – so if you are a buy and hold investor; no problems.

"I have been amazed to see houses sell for more than the seller originally wanted through auction! I see this in the realtors offices where they record auction results of properties they have sold under auction. Amazing …"

As for auctions; there has been an interesting argument between myself and a realtor called Jon Chown in the past few days regarding auctions on this forum. I like Jon and I enjoy his posts, but we disagree about auctions.
Look for the thread "I have a question on Past Auction/Sales Results???? under General Property.

I have 2 more questions;
what is your plan with the money after you sell the property?
You said you were aiming to do 2 reno projects per year; does this mean you will be aiming to become professional renovators and live off the cashflow of the sale proceeds?

I just saw the website for changing places. Why do real estate agents always wear red ties in their advertising guff??

All agencies will try to charge you a percentage of the sale price usually.
This is not a law, and you can set the terms of the Sale authority as whatever you like.
Agents won't tell you this of course, and they will always try to get you to sign the "standard contract", and pay them a percentage.
If you want to pay them a flat fee for selling the house, just ask them if they are willing to do it this way before the contract is signed, and if they say yes then write the amount on the contract and cross out the sections where the percentage of sale would go.
$5k is a good number; they probably won't be interested for less than that.
Also, don't forget to tell them that they can pay any advertising costs out of that.

"The Auction programme is a three phase marketing process that allows the Seller to present their property to the market without a price in order to let interested Bidders compete in an open and visual forum – the Purchaser is the person who is prepared to offer the highest price.   This process sometimes allows for the sale to be made prior to the Auction date (and this is often noted on the advertising as 'prior offers accepted') at Auction or after Auction.   The only time that a Vendor price is mentioned is after Auction because by then the Vendor should know where the buying public see the value of their property. (this does not mean that the Vendor will listen to this information) and this is the only phase that the property is classed as private treaty."

Jon,
Sorry, but you sound like an agent making a pitch to a prospective Vendor.
Are you an agent? I was for a time. I still hold a current Victorian Real Estate Representative's Licence (Victoria is the home of the auction). I've also been involved in buying and selling property since 1985, have dealt with 100's of agents and am a fan of Neil Jenman and Terry Ryder. They don't like auctions either. If you haven't seen their websites or read their books I suggest you should. They are very informative for the consumers of real estate – the buyers and sellers.
Without blowing my own trumpet; I have lots of experience in this caper.

You are right Jon; I don't like auctions as there are so many dodgy practices involved in their process it is totally disgusting, and in my opinion the process is bordering on, at the very least; gross negligence by the real estate industry for not cleaning up the disgrace that it is. The terms "overquoting and "underquoting" should never have to be mentioned in the auction process of selling real estate, but unfortunatley they are mentioned – very often.

"The Auction programme is a three phase marketing process"
Jon, you are also right that it is a 3 phase process; 
1. "buy" the listing. (inflating the prospective sale price to the Vendor to get the sale authority).
2. "condition" the Vendor. (work on them to drop their expectations of a high sale price during the marketing campaign).
3. get the property "on the market" at the auction and make a sale at all costs. (pressure the Vendor to allow the property to sell with or without further bids).
 
"the Purchaser is the person who is prepared to offer the highest price."
The Purchaser is the person who is prepared to pay ONLY the price they have to pay to buy the property. You know as well as I do Jon, that this is almost always not how much they can actually pay.
The auction system quite often robs the Vendor of the best price they might get for their property, and many Vendors, who are inexperienced in real estate selling/buying don't know this.
For example; if I have $400k to spend on a property, and at the auction my nearest competition only bids $385k, do you think I will bid the full $400k to secure the property? Absolutely not Jon; I'm going to offer $385,500, or even $385,100 thus robbing the Vendor of $15k that I might have had to spend if there was genuine interest in the property and I had to offer my best price, not knowing what other buyers have offered.

"This process sometimes allows for the sale to be made prior to the Auction date (and this is often noted on the advertising as 'prior offers accepted') at Auction or after Auction."
So if offers are accepted prior to, or after the auction, then why have an auction that costs a lot of non-refundable dollars at all? Aren't offers to purchase normally what occur in a Private Treaty Sale? Of course they are Jon.

An auction sale is where the property is put before the public who will openly place bids to hopefully buy that property. The property is sold to the highest bidder on the day, provided the highest bid has surpassed the vendor's reserve price.
If someone makes an offer before the auction and the Vendor accepts it, then this is a PRIVATE TREATY SALE. No AUCTION took place.
The same thing goes for a sale that is completed after the auction has been conducted and the property is passed in. The Vendor is then negotiating with only one buyer; this is a PRIVATE TREATY SALE.

Of course Jon, the real estate industry will spin this result to show it as an auction sale. Everybody then gets the impression that auctions get results; and they do. That's why agents love them. They are virtually guaranteed a sale and a commission no matter whether the Vendor has received the best price or not. The agent's number one priority is to get a sale and the all-important commision, auction fee and advertising budget dollars that are subsidised by the printed media.

It is a well known fact that real estate agents try to steer the Vendor towards an auction because it usually results in a sale by a certain date, (or soon after if the agent has done his/her job well) and they can also generate thousands of dollars in extra income through the marketing campaign. Of course, there is also the auction fee as well.

The normal procedure in the 1st "phase" is the agent tells the Vendor they can get X dollars for the property. They usually inflate the price to "buy" the listing; the vendor gets excited over the prospect of a high price for their home. Then the agent advertises the property several thousand dollars below what the agent has promised the Vendor they will get for it. When the Vendor asks why the advertised price is low, the agent invariably responds with a line such as "this will attract a lot more buyers and create more interest". The problem is, it attracts buyers who can't afford to pay what the Vendor is expecting and the buyers don't even know they can't afford it yet. This is "open and visual"? yeah, right.

The 2nd "phase" is the "conditioning" of the Vendor. Over the next few weeks, as open for inspections are held to show prospective buyers the property (and for agents to collect names and numbers for future sales leads) the buyers make tentative or even strong offers, or show interest at the price range that was advertised and also what they can afford. When people ask what the property will sell for, the agent is usually vague and gives broad ball-park figures; quite often well below what the agent has told the Vendor they can sell it for, and what the Vendor is expecting. Of course, the agent doesn't let the Vendor know what he/she is telling the prospective buyers about price range.
The agent meets with the Vendor at various times to let them know that there is interest, but at a lower price range. The agent may say something like "this is what the market is telling us your property is worth". This hopefully plants in the the Vendor's mind the thought that the property may not sell for what they expected, and to be prepared to accept a lower price.

The 3rd "phase" is on auction day. The Vendor meets with the agent, who summarises the marketing programme and shows the Vendor the level of interest and/or any offers (usually too low to be of any interest to the Vendor). The agent will also ask the vendor what the reserve is. The auction is conducted with serious (and painfully annoying) theatrics, and hopefully bids are received.
a) If there is no interest the property is passed in and the whole program reverts back to a Private Treaty Sale. The Vendor has just done a $1000 or so for the waste of time auction and more for the subsidised advertising, and will need to start again. The agent gets the auction fee and the advertising budget. Yahoo!! The Vendor still hasn't sold the property.
b) The property has bids, but not high enough to sell the property to the Vendor's expectations. The property is "passed in" to the highest bidder. The Vendor now negotiates with the highest bidder; a Private Treaty Sale occurs, the Vendor sells the property hopefully and the Vendor has wasted the cost of an auction. The agent gets a commission, auction fee and subsidised advertising budget. Double Yahoo!!
c) The property is sold at auction after it is put 'on the market". Many times the bidding will end soon after this with no further increase in price. The Vendor is obliged to sell the property now. No-one knows how much the successful buyer would have paid; probably more. The agent gets the auction fee, the commission and the subsidised advertising budget. Double Yahoo!! The Vendor may have sold it for more. We will never know.

"The only time that a Vendor price is mentioned is after Auction because by then the Vendor should know where the buying public see the value of their property."
The agent and the Vendor have already discussed the prospective price of the property when they sign the Sales Authority. No-one ever sells a property without a price in mind. In an auction, this is kept a secret from the buyers (and sometimes from the agent). This is not exactly an "open and visual forum" for the prospective purchasers.
In a Private Treaty Sale, everyone knows what the starting point is and the agent (if they are any good) will work hard to get a price as close to the asking price as possible. That's why they are paid very large commissions one would think.

My final shot is this Jon; if Auctions were such an "open and visual forum", then why did the Govt have to introduce a law to outlaw dummy bidding, and why did the Govt introduce fines (that are not enforced) for overquoting and underquoting?

Keep in mind with AUCTION results that many include the results of a sale that happens before or after the auction date.
This is spin on the actual result; especially if quoted in newspapers.
A sale made before or after the auction is not an auction result; it is a private sale.
This may not be important, but the r/e industry and newspapers use an inflated and false stat for AUCTIONS to promote auction sales and make the market look better than it really is.
Agents love them as they invariably get a fast result (a sale) – good or bad and make a few extra dollars along the way from advertising.
So there is a vested interest in promoting auctions as a tool to sell real estate.
Look carefully at the passed-in results of auctions in relation to the total amount of auctions, and who is funding the publication of those results.

Also beware of sales results that quote AVERAGE and MEDIAN PRICES. They are extremely generalised and may not reflect the true value of a particular property type in a particluar neighborhood.

For example; the MEDIAN PRICE of a suburb is the price of the property that is exactly halfway between the total number of sales.
Say there are 100 sales for a suburb, and the median is quoted in the paper as $300k. This is the price of the 50th property sale.
Then there are another 20 houses sold in that suburb for around $250k over the next 3 months. The median price will reflect a price drop in the median.

For example; the AVERAGE PRICE for a house in a suburb is the price of each house when averaged out across the total amount of sales dollars for that suburb.
Say there are 100 sales, and the total dollars for those sales is $40mill. The average price of a house is $400k. But then the next 50 sales are of houses in the $700-800k price range and no-one buys a house below $400k for the period being studied. This will reflect a rise in the average price, but the real price of the lower end houses hasn't increased at all.

I know when a boom is on; real estate agents are so busy they don't return your calls. They don't need you.
You know when their business is quiet; they won't leave you alone.

I agree with wayneross; there is a deal of the century every 5 minutes, so don't worry if you miss this one. But there are more concering issues that need addressing first. Your personal debt.

What is the rental return on this property?, what are the rates?, is it likely to be cashflow positive if you buy it? because by the sounds of your post I don't expect you could carry much negative cashflow right now.

Did you know that around 20% of the rent is eaten up by holding costs each year; and that doesn't include the loan interest?

You need to know all the numbers involved to select a successful property investment.
Successful property investing requires excellent monetary control, habits and financial knowledge.
Based on what you've posted, I think you need to get your Personal finances in order first, and adopt a different mindset to handling money. It is good to hear you are decreasing it now, but the creation of it in the first place says something about the way you handle your money.

You need to treat your Personal finances like a business and run them like a business; then hopefully this mindset and good money habits will flow over into your investing when you begin.

Please don't think I'm picking on you Dr.Spock; I want you to be successful and wealthy, but there are some basics that need to be in place first.

A fantastic book you should read for getting out of debt and back on the right financial path is the "Money Secrets of the Rich (the seven money steps)" by John Burley. He has a great formula for getting rid of Personal Debt called the Debt Eliminator in this book, as well as hundreds of great money saving, lifestyle improving techniques.

No one likes doing budgets, but the reality is that successful businesses ALWAYS use them, and investing is a business, so it would be a good first step to sit down and work out how you can maximise how much cash you can save through trimming off the "wants" and only focus on the "needs" unitl the debt is gone. I won't kid you; this is a hard reality to face for most.

The first move should be to cut up the credit card(s) and only pay cash. No cash; no buy.

A Depreciation Schedule is a list of all the components of a building (house) and each item is priced and given a "depreciable life".
This means you can depreciate the whole building and all the fixtures and fittings, at different percentages for each item, each year, against you Personal Income.
For example; the building itself is depreciable at 2.5% for 40 years (100%) from date of construction. If the building cost $100k to build, then you can claim $2,500 per year at your Personal Income Tax Marginal rate against your Personal Tax.
Carpet has a "life" of around 10 years I think, so you can claim the carpet at 10% per year for 10 years (100%) and so on.

The schedule is prepared by a Quantity Surveyor at a cost of around $500 (which is also tax deductible) and is given to your accountant who will apply it to your taxable income every year.
The tax savings from all of these "on paper deductions" can be significant, and puts the cream on the top of a good property investment.

Even though you would be paying $350 per week in rent, you will still get a nice rental income on a house worth $550k (check with the local agents on the likely rent).

Say for example you got $450 p/w, the nett rent (after all holding costs are considered – around 20% of rent) is likely to be around $360 p/w. Your repayment commitment is now $340 + $350 (your rent you have to pay) which is $690 p/w.

That's around what you are already paying in mortgage payments, and we haven't even considered the tax deductions on the holding costs and the "on-paper deductions". If you are earning good incomes there cold be substantial tax savings.

If you were to get more rent than $450 p/w for your PPoR, and you rented a very modest house yourself for a round $200-250 p/w, you could end up with an I.P and a nice cashflow. On a newer house such as yours, you may also find that your nett rent may be higher as well as my 20% figure includes all maintenance – not really a lot required on a 1 year old house you would think.

With the refinance, you use the available equity for the deposits and purchase costs (around 6% of purchase price) and you can either take out new loans for the balance, or with some lenders they will extend your existing loan on your PPoR to incorporate the loan amount for the new I.P's – you have only one loan for all properties.

Totally agree.
$200 worth of good books and a few months on this forum and the Jan Somers one will do it!