Good story, but spoiled by that silly Kevin Young quote!

SMSF and property work well, especially borrowing at 80% LVR IO with a 100% offset account. Positive gearing is even better. It won't be long before you save up the next 20% deposit in the offset for the next one.

its best to set up your own excel spreadys because each person has taylored (esp Richard) their own spreadsheets to their own needs.

Also a good way to learn about property and tax – and excel.

a few comments

Go and see a broker about your dad and his wife qualifying for the loan. Stamp duty would be payable on the transfer to your dad at market rates, but you could transfer it for whatever price you want.

Selling property for under market value can give rise to centrelink issues.

Your loan agreement will probably prohibit you reassigning the loan without the bank's permission. And transferring the equitable ownership of the property would be a breach of your mortgage agreement too and would result in stamp duty.

You could use equity but what would have happened if I had borrowed $130,000 and then had to sell at $120,000? I would have had to find $10k cash.

Also the option buyers solicitor would recommend they lodge a caveat to protect their interest so it would be impossible to borrow in most cases.

Let me illustrate what happend to me when I did a lease option (made up figures but similar to what happened)

Buy for $100,000 and sell someone an option to buy at $120,000 with maybe $50 more per week rent comng in.

In 2 years property doubled in value to $200,000. Tenant exercises their option and buys it from me for $120,000.

I make a profit of $20,000 plus $50 pw x 2 years. But I miss out on $80,000 capital growth!

try http://www.houseofwealth.com.au

Don't know the situation in Vic, but you can probably terminate or rescind the contract if there was non disclosure like this.

$500 pa is probably a reasonable figure for the neighbour too btw as you will be using his land and wearing out his driveway etc.

Yes, they will be able to sell your property and apply the proceeds to pay the debt and legal fees – which will be high.

If you cannot pay then it would be preferable for you to sell rather than them as the costs and fees would be very high.

Probably the loan side of things would be equal.

Using a discretionary trust would give added tax flexibility though. You need specialised advice though as there are heaps of issues, especially if you end up making a loss.