Ok Steel, lets shift focus a little onto these new houses you talk about.

You say a 5% deposit secured that home, which therefore means there is also mortgage insurance involved which is usually 1% of the loan value.

So for the purpose of the exercise would you kindly provide the following.

Cost of home
Rental return, net after any agent/letting fees.
Rates

In the interest of not being personal, I would not request any personal info, its just that I would like to know more about this as both my kids are looking to invest.
Looking forward to this info.

Dear rehctub,

Actually mate you will find that mortgage insurance is closer to 2% than 1% which is why you need to avoid it at all costs.

I don't certainly intend stepping through the specific details of these houses on an open forum as I am not anonymous to quite a few here. Nor do I intend giving financial advice so perhaps we can do this in the form of a hypothetical.

Let's assume you and your son decide to buy a couple of houses in a similar project. If you personally own your home and perhaps have other rental properties substantially paid off then mortgage insurance is not required.

What about your son who is investing for the first time? As stated mortgage insurance is generally around 2% of the total amount of the loan, unless of course he has a 20% deposit which is a hell of an ask for someone who has just turned 20.

Perhaps you could get your conveyancer to split the loan into two. You might then go guarantor for the difference between your son's 5% deposit and the 20% required say $40,000. You might have an agreement with your son that any excess paid off the loans goes toward paying the one covered by you first.

You might be entitled to feel you had saved you son nearly $5,000 with no cost and minimal risk to yourself.

Cont...

Cont...

Again this is purely hypothetical. There is a marked difference between interest rates for a first home buyer and those for an investor. Perhaps your son 'fully intended' to live in the house during the build but found 'circumstances had changed' near completion. It could be that he was 'forced' to put it on the rental market as a result. The loan repayments might stay at the cheaper rate.

Perhaps you buy these houses side by side on a subdivided block. You might then be able to negotiate a better deal with the rental agents and the building company.

Now some advice for what it is worth.

The one thing you shouldn't skimp on is your conveyancer, good ones are really important and definitely worth the money.

So is getting independent rental valuations before signing anything. Even then nothing beats keeping an eye on what rents are being realised in the area for new homes. When a house is no longer being advertised for rent ring the agent to see what it was eventually leased for. This will give you an idea if the market is soft.

Homework is such a big part of it. While I'm not giving out specifics for our situation revitalisation projects are easy to Google and you can quickly do your own costings. My two have decided these areas provide cheap access with the hope that the areas will become more desirable in the future. They may well be wrong so make you own investment decisions based on your own research. I hope your sons do well.

Good old Malcom has gone and kicked an 'own goal' by snubbing the people of Brisbane. Take a bow you fool.

I though Bill handled himself very well that night, but I doubt well enough to win because labors problems are far worse than a leader of his ability and record can fix.