Hi Ya,

Firstly, don't purchase a house because you'd like to live there.  Big mistake as it is the wrong basis for a decision.

Secondly, only ever purchase a house when the numbers tell you to.  There are any number of good applications available that will work the numbers for you ranging from Excel spreadsheets to full applications that work out all of the pros and cons.

Thirdly, with $600K to spend, do not go out and purchase a house.  With that sort of money you have enough capital to purchase 4 houses valued at $500K and have change (that allows for a 20% deposit which will give the banks some comfort and cash to cover purchase costs).  Why purchase 4 and go into debit when you could purchase without debit?  Simple.  For ease of comparison and calculation let's assume a 5% capital gain average.  If you purchase one house valued at $600K you will have one property valued at $600K and your equity will increase by $30K in the first year.  While that is nice, it is just $30K.  However, if you purchase 4 houses valued at $500K, you will have $2 million worth of property increasing your equity by $100K in your first year.  That $100K which will be enough to purchase an additional house house in your send year and every subsequent year thereafter.

So, if you purchase 1 house valued at $600K, at the end of the second year you will have $600K worth of property earning you capital gain.  But if you buy 4 now, at the end of your second year you will have $2.5 million (minimum) earning you capital gain.

Having said that, I'd suggest you purchase houses on 10% deposit, not 20% however, that will mean you will (may) have to pay mortgage insurance.  Why would you do that?  Simply.  Mortgage insurance may cost you up to $10K per house.  So what?  By only making a 10% deposit, you increase your purchase opportunity by 100%.  That means that in the example above, instead of having 4 houses earning you capital gain, you now have 8.  In other words, for an increase in cost of just $80K you increase the value of your your property portfolio by an additional $2 million (it's now $4 million not $2 million) earning you $400K capital gain per annum not $30K.  With an additional $400k per annum in the first year that is enough capital to purchase an additional 3 or 4 houses in the second year meaning your portfolio is now valued somewhere between $12 and $13 million earning you capital gain etc, etc, etc..  You can do the sums for yourself.  You could even retire and live off the capital increase by line of credit.

No wonder books titled "from 0 to 130 Houses in 3.5 years" can be written.

My own example, and I do not have anywhere near 130 houses – yet.  During 2010 I had $73K to 'spend'.  That $73K was a line of credit on my current dwelling, on which I still owe near $200K.   Early December I signed a contract to purchase a property in a coal mining town in Queensland for $468K.  I put down a 10% deposit.  Fortunately for me my bank contact used the mortgage insurance already paid on my dwelling to cover the Qld purchase.  The house cost me all up $485K after expenses.  When I signed the contract it was still being built.  I took possession of it 30 June 2011 and had tenants move in 13 July on a 12 month lease at $950 per week.  That is a little over 10.5% rental return and i've been advised by my managing agent it could go to a minimum $1300 per week (nearly 14.5%) if the current tenant breaks their lease and the property goes back on the market!  So don't be excited by 8.5% rental return.  Do your research first.  By September 2011 I was advised i could put the property on the market for sale at between $560K and $580K. Had I waited for a 20% deposit, I still would be without an investment property, I would be approximately $100K worse off and I wouldn't now be considering having my second investment by the end of this year.  So far I still haven't seen the property.  I live in Perth. (I have seen photos). By the way, quess who won't be selling!

Bite the bullet.  Do it.  Listen to the advice Steve (and others) provides.  It's good advice.

Why purchase where you get either rent or capital?  Go where you can get both!

Cheers.