Want to grow portfolio – need financing ideas

Hi,

Friends of mine own (or rather, they and the bank own) 5 houses.  They are:

3 bed rental  value $220k – rents for $250 pw
2 bed rental $215k – rents for $235 pw
2 bed rental $215k – rents for $235 pw
2 bed rental $215k – rents for $235 pw
4 bed PPOR $320k

At the moment they have a $310k interest only full doc mortgage secured on the first and second listed rentals.  Nothing on the third and fourth. They also have a $220k full doc repayment mortgage (ING) on their PPOR.

They can draw down a further $40k from the mortgagor (NAB) of the first two houses.

Now, what they want to do is buy/build a few more rentals – preferably without selling anything they presently hold.  They would like to buy a 3 bed house on a large block of land, renovate it and strata title the land and put another two units on the land.  They can buy suitable properties for around $250k with sufficient land.  The reno costs for the existing property plus purchase costs (stamp, conveyancing etc…) normally come in at $30kish.  The house would be valued at about $290k after reno.  The units would cost about $160k to build each and would be valued at around $235k.  They'd rent for about $250pw.  They don't mind selling a property at the end so long as they can ultimately hold onto to a couple of extras (and not be strangled by hugely negative gearing.)

The hubby works part time and makes about $50k a year. He has an ABN and is GST registered.  His partner is on $55k which was used on ING mortgage.

They are debt free bar mortgages.

Their broker has suggested an idea but they are interested in other view points.  How would you finance this project?

Any ideas very much appreciated.

Thanks.

Andy