What should i do ?

Ok quick calc on your current situation is .. 200k @ 5.25% you are getting about 10.5k gross on your current invested amount.

Be aware that this remains gross .. the income you receive from this is liable to bank account taxes .. government taxes and is finally treated once received by you .. as additional income.

So you may think you are getting 5.25 percent .. but unless that is your sole and reliant income source .. you are going to have the taxman loving your money too.

As a 20% deposit .. it would allow you to borrow up to a million. That of course remains dependant on your actual income. You havent stated if you are actually earning or not, so i've left that open in the equation.

There is however another way you can make the most of this .. again .. dependant on your actual income. You can purchase a property outright inc stamp duty. Leaving yourself with 100% ownership of the property .. and a residual income from the property. This solution boosts your assesable assets, your free income. This means that the next time you approach the bank .. you have a greater clout to borrow with. And of course you can claim deductions on various expenses from the property against your income. Banks have a greater chance of approving a loan linked to a property with a high LVR.

I mention this particular scenario because i've now done it several times for people i know who were poor borrowing risks with the bank due to low income levels. They've all been very appreciative for the efforts i put forth.

If you feel you can do better than 5 and a bit percent in the current market .. you are absolutely right. I have been investing at returns of 6% or higher gross for the last 2 years, and most of them are cash positive already.

Again .. dont pick just any property .. pick the good ones .. and for the right reasons. The rest of the scenario will complete itself.

One thing I should add .. and this is very important .. dont get emotional on a property. If a property is seen to be producing great cash returns .. and you find it .. take out the emotions from the deal. If that means coming back the next day and possibly missing out on a sweet deal .. so be it. Unless you have sound numbers .. a good idea of how the property will work and a proper unemotional assessment, you may jump in where fools fear to tread.

On that same note .. I refrain from mentioning specific areas, as i go on my assessment of the areas and .. i will have purchased different properties with different risk levels than you might. But I am aware of areas returning 8% to 10% .. and safer areas returning at least 6%.

All this also depends on your ability to negotiate on price as well.

Well I wouldn't pay cash for a property as you'll be paying tax on the rent as you'll only have rates and depreciation to offset the tax.  At the most pay enough so that it's cash flow neutral. That way it won't cost you anything to hold and you have more property increasing in value.

I would look at buying 2 properties around $200-250K using your $200K as deposit and in costs (stamp duty etc).

If you buy well you will be CF+.

You shouldn't be holding large amounts of cash in your personal name. Too dangerous and tax disadvantages.

Consider gifting to a discretionary trust and borrowing back to purchase property.

If you bought a house that yields at least 6.2% and borrowed any of the extra money you need to cover off the last portion of the property price does not cover, and your stamp duty and legal fees, you would end up with a surplus rent (after holding costs) of more than $850 per month.  An example is to get a house in Corio VIC.  A house priced around the $230k mark will generally fetch about $275 per week and that would achieve your goal, plus you'd enjoy capital gains, plus you can put the rent up each year.

Not naive – just need to consider the whole picture.

While your capital growth calcs make sense. It does depend on what ILIKE is trying to achieve. His (?) earlier post suggest 'income' is the greatest focus.

So if we explore further your possibility we would need to consider income V costs.

Costs would be approx $91K for loan interest and $17K (allowing 1% of purchase price) for other costs giving a total of $108K in outgoings.

To outperform the current return of $850/month (gross) ILIKE will need to purchase property with minimum rent return of 7.15%

EDIT — some rough maths being applied so further due diligence required.

Could also use a small deposit and place remaining funds in an offset account.

Do you see any CG prospects there or are you happy with just the cash flow?

Albury remains a country town exposed to the rural elements .. however .. it has managed to substitute in a large sector from the Australian Tax Office .. which now headquarters there and is just expanding its premises at the moment.

It has a reasonable industrial backyard and has most of its older housing commission areas now being sold off as owner occupiers.

In other words .. Albury is going through a refurbishment as we speak. The two main shopping centres are getting to be quite large and there is a reasonable amount of activity taking place within the town.

It also has a possibility of a fast train going through within a year or two.

My reason for investing in Albury is that the town remains central to VIC/NSW relations and as such .. a reasonable place to invest for the next 10 years.

And that for me .. means Capital gains too.