Don't  panic, I'm not actually that sensitive.  I did try to put in a positive comment – see how I said it was a lovely area?

Tony B
Carpe makes some great points.  And, the best course of action has something to do with what sort of lifestyle you want too.  Would you like to live in your own home?  Are you simply trying to make the smatest money move you can at the moment?  If the first is correct, go buy one.  I'd agree wholeheartedley with Carpe's criteria on property selection.  Buy at the lower end.  The fact that you are in a country area, and you can get housing for $135000 means to me that even if values do fall, you won't loose much.  I'm very doubtful that that end of the market would lose 40%.    If you want to make the smartest money move, then lots more research is required about wether you would live in the property you buy or rent it out.  Issues like FHOG, your marginal tax rates and the amount of cash you can put down (and consequently how much interest you will pay), achievable rent etc are all part of that equation.  Renovating may be a great way to have your own home, and still make a good deal of money, even in the so so market that we have at the moment.  If you bought now, agressively negotiating a good deal, renovated prudently and tastefully, you could do very well.  I do think that the property market is a bit like a never ending rollercoaster.  There are ups and downs, but you only truly miss out if you completely fail to jump on.  Cheap  interest rates and buyers market means to me, buy (carefully though).

OK, I was just about to go and do the dishes – happy distraction!
Port Douglas is really just a holiday town.  It is lovely.  A very nice place to have a holiday.  There is ALOT of holiday accomodation there.  There is a large high end international tourist trade there, too.  The very large tourist sector has given rise to all sorts of employment opportunities which has led to a few new housing estates in the area.   These sectors are expected to be hit quite hard by the global economic crises.  Two fold, 1 – tourism down, 2 – fat cats who lost lots on the sharemarket may try to dump their holiday home to get some cash.  Please do not let the agent talk to you about biofuels, defence, agriculture, mining, or even govt expenditure.  Port Douglas is too far from all of these things, in reality.  There is no industry in Port Douglas.  Sure, it's a Port  – for pleasure yachts, and tour boats. The thing about this part of the world, is that the roads wind around the edge of the coast, which makes for a spectacular drive, but a slow one.  What looks like a short distance on the map is actually quite a long drive.  Agents would love you to think that Port Douglas is in the lap of Cairns' much wider, more stable economy, but this is not really the case at all.  Even the Cairns economy is very largely driven by Tourism.  When I was there a few weeks ago, there were several restaurants and other tourism businesses closing down (of course it is the international tourist off season now). 

If you would like a lovely tax deductible holiday destination, in one of Australias premier tropical destinations, then this does tick those boxes (though reading the thread there are alot of question marks on other boxes).  If you would like a smarter investment, still satisfying this criteria, perhaps I can direct you towards the Cairns Northern Beaches area, instead.  This area is basically half way between Cairns and Port Douglas.  Palm  Cove is very exclusive and a little too far from Cairns, but there is another suburb called Trinity Beach, which is an easy commute to Cairns, handy to Port Douglas, has its own little seaside village thing happening, and is very lovely and I believe not too bad value for money generally (though wether or not to buy now would require some more discussion and research).  Here you can have a holiday home, or apartment, you can have lovely tax deductible holidays in North Queensland, and you have the option of letting the property long term to the wider Cairns tenant base. 

Of course, if you are just after the best investment you can make, I'd seriously consider just dumping the holiday letting idea, as many have alluded to.  These properties are very rarely cash flow positive, due to their high costs and the fact they are often vacant.  The 50% of rent that the manager is taking seems a little exhorbitant to me.  I can't comment on the body corporate etc etc as my experience is really limited to housing, not units.  I doublt that it would help at all if the management company is a publicly listed company.  Their duty to their share holders will always take precedence over their duty to you.

Good luck.  Make sure you look closely at some comparable deals, and do your cash flow feasibility based on about 50% occupancy (which may even be optimistic).

Tony B,
I just wanted to say that I really enjoyed your posts.  From the beginning I found it pretty hard to reconcile the spelling, with the fact that you didn't sound foreign, and the fact that you did sound educated.  I guess that one's solved.  At the airport this morning I picked up a copy of Australian Property Investor mag, which is not usually something I do.  It has an article that I think you'd enjoy about the health of the Australian Property market.  It makes alot of the same points that you do, and basically says that sharp rises in unemployment is probably the main threat to the property market at the moment, and that the markets in the capital cities in the $200K – $600K house sector have probably bottomed out.  Top level RE to take some more hits.  The reasoning was all pretty sound. 

Where I have trouble with all this conjecture, though is that I really feel that all the averages bandied around by commentators are pretty useless.  I have property in country SE QLD and NW QLD.  What happens specifically in these centres is what is important to me, not averages based on Syd, Melb, Adel, Bris, Perth etc.  I reckon that property demand in an area is pretty dependent upon who wants to live there.  And that is pretty dependent upon the LOCAL economy, not the average of all Australian cities.  Someone with a house in St Kilda is likely to be affected by different economic circumstances than someone with a house in Townsville, and they are in turn affected by different economic circumstances than someone with property in the North Western suburbs of Sydney.  I just don't think you can say wether or not it is a good idea to buy property now, unless you specify WHERE.  There are a few knowledgeable people saying it is a good time to buy in the North Shore of Sydney.  And then, it is also a bad time to buy in say, Dysart (at a guess) – a mining town in QLD.

You've sparked a good discussion and I look forward to more of your posts.
S

I found that my solicitors and accountant's opinions on this matter varied.  Which was a bit of a pain.  In the end, I listened to my accountant's opinions on tax matters and the solicitors on legal risk, and went with the solicitors advise because legal risk was of more concern to me (and that was really his area of expertise), and his recommendation cost considerably less to implement and maintain.  Then I formed the company myself, rather than paying a ridiculous amount of money for an off the shelf company.  I found it quite straightforward, really ( it was only a pty ltd company), with my background and training.  This was for business, rather than investment purposes.

startxing,

This is where I holiday, every year, and, as property investors, looking at the local real estate is always an interesting part of our holiday.  I'd be interested to know exactly where this place you speak of is.  Your original post seems to say that it is in the Cairns – Port Douglas area.  Where exactly?  The question is because the two places are not really the same economy.  Cairns has a much wider economy than Port Douglas, which is mainly tourism, and largely high end tourism driven.  Port Douglas is not a realistic commute to Cairns, in my opinion.  Or is it between the two in the Cairns Northern Beaches area?  I can't really be any more specific about economic influences unless I know exactly where it is.

I had an interesting conversation with an investor about holiday letting.  She was doing her own property management on a couple of IP's in the Cairns Northern Beaches suburb of Palm Cove.  She found that it took alot of trail and error to build a web presence in order to get some guests, and that it also took her a long time to build a team of reliable people to do things like cleaning and maintenance for her.  She found that the property was only reliably let during the busy periods, and that she had lots of vacancy during the off season.  Her alternate option was to pay a property manager to manage the properties for her.  Property managers charge a large amount of money to manage short term lets.  I was quoted a number of figures between 20% and 30% of gross rent.  I certainly got the impression from her that the properties did not really perform all that well on a cash flow basis, and that they were largely a negatively geared investment given the high running costs of such an investment.  The properties were returning rent over 10%, but the costs were too high, and  the income too unreliable.

Initially, my feeling about this deal is largely negative, as I am always suspicious when an agent has to try so hard to sell something.

Let me know where it is and I'll tell you what I know of the local economy.

cheers
s

Sounds to me like your whole plan makes alot of sense.  If you have truly done the maths, and can truly afford the property, then great.  Perhaps someone here can give you some advice on how to claim the FHOG. 

I'd like to talk to you about something else.  You need to be very clear about the motivation behind your purchase.  It sounds like you have found a lovely property and have both fallen in love with it.  You have a romantic relationship with the property, not an objective one.  If I am right, then there is nothing wrong with this, so long as you recognise it, and realise the potential that the way you feel about the property has to influence your decision, your reasoning, even your research.  Are you trying to buy a property that you love to call home?  Or are you trying to make a savvy investment decision?  Once you are attached to a property, emotionally, you will start to grab on to any bit of information that says "buy it" and discard any bit of information that says "slow down there".  This is not somehting that you will do deliberately, it just happens subconciously.  I'd like you to be aware of it.  If you are primarily trying to make a savvy investment decision, then you need to somehow seperate your feelings about this property from your decision.  You need to make an objective decision.

If you are trying to buy a lovely home that you love, then it's just fine to allow your emotions to cloud your investment savvyness.  It would be best though, if you could actually work out how much your emotions are going to cost you (if anything).

I can't talk about the property, or it's value as I have no knoweledge of the Melbourne market.  I just picked up on a strong tone of yearning within your original post.
S

D,
I would certainly be interested.  When we leave our current situation I would love to earn a living from RE.  I think I could be a good RE agent.  I was a very successful media salesperson 10 years ago.  But, I'd rather be a mum, and not have to work 7 days a week (or even 6), and I'd rather work for myself, which makes working as an agent a bit hard.  So I'm currently looking for similar ideas that fit my desired lifestyle better and still pay the 6 figures that we are accustomed to.  If we are successful in a tender bid later in the year, we may spend another few years here and leave with enough equity to make a living from our own real estate (market conditions allowing).  Your workshop sounds like it would have a very useful scope to someone in my situation and I'd love to hear more.  Of course, I'm having a baby in June, and I live in NW QLD, so my logistics are difficult, and anything offered by distance, correspondence, or internet mode would be much easier to access with two small kids, a baby and a business to look after.
cheers
S

Thanks gmh454.  Rabbits, huh?  For eating?  Like a business?  Mum's having trouble with foxes with her chooks.  They had this lovely idea of semi self sufficient living, then found out how much hard work it is to pluck a duck, and just how much corn it takes to fatten them!  Something of a reality check, I think. I think I'll stick with killing our own beef – much more practical.

Except for old kruddy desperately running around with a pincushion!  I believe we should see the release of just such a pincushion tomorrow designed to prop up the lower end of the commercial property sector.   Be interesting to see what he tries next.  Sooner or later, surely he's going to run out of pincushions.