A call to action, $26,500 FHOG/B ends 30 June 2012!

Hi Guys,

It has recently come to my attention that the first home owner grant/boost of $26,500 in regional Victoria will end on 30 June, 2012. This along with the recent rent increase of $40 per week has prompted me to take action, and I am considering purchasing my first PPOR ahead of schedule. I would like to purchase this property for capital gains (+$100,000) over the next 5 years, but have it neutrally/positively geared at the same time.

One of the emerging suburbs that seems quite promising is 'Lucas, Alfredton', which is located in the wealthier parts of Ballarat and very close of suburbs that have recently boomed (rippled effect):

"Lucas has been planned to include all the things that people need to function well together as a community – shopping and employment, schooling, community facilities, public transport, extensive parkland and community spaces and a variety of housing types." http://www.lucasballarat.com.au/life-at-lucas/masterplan

I am currently in the process of conducting research, but in the past 72hrs I have:

1) Spoken to a couple of real estate agents
2) Confirmed infrastructure plans and estimated time of completion with council
3) Placed a block of land on hold (about 200m away from school/park, and 800m away from shop)

I am thinking of building a 4 bedroom/2 bathroom/2 garage home on this block of land, and renting the rooms out individually for +$100 per week. The estimated cost of land is $130,000 and cost of building after accessing FHOG/B is $125,000-$150,000, bringing loan to around $280,000 and based on 7% interest p.a. would result in $377 per week interest repayment.

Based on a yield of 5% of surrounding suburbs, receiving a rent of $350-$400 per week, would equate to price of $364,000-$416,000. The next purchaser I have in mind at this stage is a young family, and I am thinking of selling within the next 3-5 years at the peak, once most of the infrastructure is complete.

My questions are:

1) What are your thoughts and views about the above? Do you have any words of wisdom?
2) How do you normally go abouts with your due diligence and research?
3) Am I allowed to claim FHOG/B, and then rent out the rooms that I am not residing in?
4) What are the tax implications? Will the property still be considered PPOR or IP? Will interest repayments be deducable? Will I be able to claim depreciation on the cost of building, if so how much? What about the contents inside the house that is shared such as furniture, electrical appliances, oven, fridge etc?
5) Are there any good accountants, lawyers and mortgage brokers you would recommend in Ballarat/Melbourne?

At this stage I am still in the process of conducting my due diligence and still remain undecided about whether to go ahead with PPOR purchase (need to analyse median house prices, jobs, housing finance, buildings approvals, and consumer sentiment), but any thoughts, opinions and words of wisdom would be appreciated.

Kind Regards,

Kong