My idea (pick it apart – tips please) REALLY REALLY NEED HELP

Hi James

Have either of you benefited from the FHOG (first home owners grant) before?  If not, you'd be wanting to get your hands on that and would therefore need to ensure you comply with the rules about living in the house for the first 6 or 12 months or whatever the ruling is now.

I'm not understanding why you would want to get yourself a PPOR (primary place of residence) mortgage with a $250k debt and then go and buy a negatively geared investment as well.  I personally think you would be better off focussing on the PPOR only for a year or two and getting that under control, as it is non-deductible debt.  That said, get an interest-only loan with offset account and pull all monies into the offset account; not onto the mortgage.  This will enable you to change your mind about the purpose of the house later on and if desired, convert it to an investment property with deductible debt. 

You will build equity at the same rate regardless of whether you are on a P&I loan or an I/O loan with offset.  So longer as you pour the same amount of money in, it is the same.  eg if you normally pay $700 a month towards a P&I loan, of which $400 is the interest component, then on an I/O loan, you'd pay your $400 interest, and you'd whack the remaining $300 in the offset account.  Thus you are indirectly "paying off" the property at the same rate.  The difference is you didn't hand the $300 over to the mortgage.  It's harder to get that money back once you do so.  You have to re-apply for additional loans and thus pay the application fees. 

Forget about a 'new' home; they cost more than an older home to start with. If you dump all your cash into a home, you cannot claim any as a tax deduction either. make sure its placed into a trust so that you can use it as an IP at a later stage.
Building a new home will also tie you up for at least 12 months with your stress factor going thru the roof with delays, council approvals, rain holds etc etc.
Make sure any IP you buy is a POSITIVE income property.
Use as small a depsoit as possible and buy as many as possible.
Place them ALL into a discretinary trust so you never limit your borrowing capacity.
Look at doing the buy, reno, rent as an easy start to building your wealth.
Get them all revalued every 6-12 months then use the additional equity to build futher.
Sell off any non preforming assets ASAP as they occur and use the released equity to buy in a better area (close to the CBD ~10km's).
Another good method is the Rent-to Buy/Option method where you take over the sellers mortgage (at say $3,000/mth) and then move it onto a 'buyer' where they do the reno themselves (over say 6-8 weeks) with the bank accepting the added value as their 10% depsoit with you negociating a higher price to start with (say a 10% profit margin). The GREAT advantage of this method is that you can handle 10-12 deals AT THE SAME TIME! making ~$25K on a basis $250K rent/buy option deal; AND you never have to pony up the stamp duty (as you have not purchased/transfered the property to yourself.

REMEMBER: You are looking to make the most amount of money in the least amount of time and NOT making the most amount of money in every deal.

Hi Bullet46 .. kudos to you for putting your foot forward in the search for new ideas !!

Personally I dont like either of your current options … and I will endeavour to explain why as we go through.

This is very much the old classic .. buy a house with land .. build on the back .. and we'll all make money approach. Nice .. cheap and affordable. But building a house takes time and money and involves dealing with 'reputable' builders. Expect at least a year or two before you see anything happen on a deal like this.

I do understand the satisfaction from a mental perspective of owning your home outright. However at your age there really is no need to get either excited or chase that prospect. At your age you should be chasing a wealth building strategy which leads you to getting a better house and a better lifestyle.

Now for my complaint on your current strategies. Both are what you would call SLOW COOKED solutions. They'll come good .. and both of them will. But you are relying on two major components .. a steady increment .. and both your jobs being consistant. Slow Cooked property solutions DO work over time .. but they are time wasting and they sap all your financial freedom in the meantime while you service the loans.

Since you seem to have the parents on your backs already .. I would suggest dividing your base into an existing IP and a house. You'll be putting more into the deal initially, but long term you'll have the money you borrow on the house as PPOR capital .. the tax deductions from the IP property to offset against your income (people forget how handy that is) the rents from the IP to be added to your income assessment for your next loan and two separate bundles of equity to borrow against for any new investment strategies. You want to build at the back? Buy a house with a land component as your PPOR. Do it later .. with the money you'll keep from your new IP.

The only difference between my suggestion and yours is the time factor. With mine you get the house .. and an IP working for you from day one. With Option 1 you gotta build a house at the back to make anything (9 months to a year before you see ANYTHING) The other option … Option 2 gives you a property you've paid off … and the real question is .. WHY? You make money from other people's money stretching your capabilities .. and why not get that whole deal working HARD for you?

Need to explore tax deductions on an Investment property? Go talk to a good tax accountant .. he'll know what you can and cant claim. Why pay more to the taxman than you need to?

Thats my current assessment of your situation. The other thing that works for you is time. And at 24 you've still got lots of it. But dont waste it on poor strategies and incoherant solutions.

Agree – nothing wrong with Toowoomba – was just pointing out that choices don't need to be limited to there and a great idea to diversify if already in the Twmba market