what course of action

Hi

I’m curious as to what people think would be a good course of action for me.

First some particulars.
– Single 26 years old
– savings c$70k
– income of c$90k + bonuses
– no debt (including hecs debt)
– minimal expenses (I’m no tight ass but I don’t have the massive bender weekends that I used to anymore and I don’t have a car… those are the main expenditures that my peers have)
– renting in Sydney

Option 1:
buy a place as an owner occupier in Kensington / Randwick. 2 bedder would be 400-450k

pros
– can rent out the other room cashy and not tell the tax man

cons
– would be looking at mortgage insurance
– would be a pretty serious loan and if property prices don’t go up in the next few years (always prudent to assume the worst case scenario) the negative equity would serious impact me being able to get an investment property in the future

Option 2:
Continue renting, but buy a positive cashflow property. The ones I have found are more in the $250k mark

Pros
– no impact to lifestyle because it is positive and hence no extra cashflow required
– The loan (and therefore the risk) is much less
– I can park my spare savings that I will earn in future into a full offset account and smash the mortgage building up more and more equity and making it more and more positive while I look to find another place.

Cons
– Other prospective buyers of these properties would be first home buyers and because of this they would have the bidding advantage of the first home buyers grant. I kind of feel that if I am to be successful in buying what is marketed as a first homer buyers place I will be paying a premium equal to the benefits the government is paying.
Option 3:

Same as option 2 but with a slight twist. In this option I buy a positive cashflow property and leave it untenanted for the first 6 months. I turn on electricity in my name and set up a phone or something in my name so I can prove to the tax man that this is my primary residence. Mean while I continue to live in my current location. The idea would be that I could get the government grants and the grants would effectively be paying my loss of rent for leaving the place vacant for 6 months. Ideally I would buy some place where I could do some basic reno (paint on the walls, new carpet, any really quick and simple value adds that might attract more tenants) and I could easily get this done in that 6 month window… but of course this really depends on getting the desired property.

What I really don’t know are:

1. What tax implications/benefits are available. All I know is that if I do the option 3 approach (or option 1) I get the benefit of a decrease in capital gains tax in the future. What depreciations are available on investment properties?
2. General opinion/your experience would be appreciated

Sorry for the length of the message. Thanks for reading