1. If we want to use the equity in our current home to finance an IP, can I use the equiy as a deposit and borrow enough to cover all legal and other fees?
Yes. there are two ways to do this. either use the same lender, and cross collateralise your properties (not recommended by most), or set up a second loan against your PPOR to use for the deposit and costs, and borrow 80% against the IP with any lender you like.
2. Keeping in mind I have a young family, and will be adding to this, are there tax benefits available to reduce my weekly tax if we invest this way?
Only if you make a ‘loss’ which can be achieved by a physical loss of cash, or by using depreciation benefits to turn a positive to a negative.
3. If I read correctly, it is better to think long term (5 or more years), pay the interest (try to get rent to cover most if not all costs) then refinance for another term at IO, and add to the property collection?
Long term is definitely the best thought process, and finding properties that don’t cost you much but have good growth, or finding CF+ places is a good way to go. IO versus P&I is a personal choice, and depends on your risk/comfort level. I like to stay IO so that I can buy as many props as I like with the cashflow I have, but need growth to make it worthwhile (which it has been[biggrin]). Others like the security of knowing that they are actually paying their debts off…
Cheers
Mel
PS I too am in ACT – Belconnen area
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