My hubby and I have just purchased and moved into our first home (3br, double garage) five months ago. It was an off the plan building as part of the ACT's affordable home owner sceme, so we had no say on it's development besides choosing between three different colour schemes offered. It is a brand new suburb and ours was one of the first houses built. Anyway, we purchased the property with a 100% variable rate home loan. It cost us $308 000, the bank has valued it at $350 000. Other houses (on the same size land, which the same specs) being built in this new suburb atm are currently going for $400 - 500 000. The house next door is renting for $400wk - it is smaller then ours; this is pretty typical of rents in the area. Canberra's housing market really hasn't suffered much due to the economic crisis. We are currently paying off Double our minimum mortgage repayments (if we got serious budgeting we could pay more). My hubby and I are in our mid-20's. Other then this we have no other debt. Our house should be paid off completely in 7-8years.

Now, our goals are this:
*Upgrade our residential property (we have two young kids, one on the way and plan on another)
*build a rental investment portfolio that would support us in the long-term (ie, I am a SAHM so have no super, so we would like to be able to retire and travel on the income, as well as help with our childrens tertiary education in 15 odd years time, overseas travel.)

We are not looking to get rich quick, but a long term stable secure way to support us and let us enjoy a comfortable lifestyle in the future.

So, I see to different ways to proceed from here:
1) We pay off our current residence, and then use it as our first investment property when we purchase a new property to live in. building up our investment properties after the purchase of our new residence.

2) Invest in another property at this point, and worry about purchasing our next point of residence after we have established a small property portfolio.

If we go option 1 the risk to us financially is pretty much no-existant, but it would be a slower journey to our goals.
If we go option 2 the risk is greater, we would be much more limited in what we can invest in for our first investment property (we aould be eligible at this point in time to borrow aprox $160 000 - without taking into consideration any rental income), Our larger home may not happen for slightly longer period. But we may time end up having a greater portfolio over all.

So, Am I missing another option I haven't considered?? Does what I have said sound right to everyone?

And most importantly, what are your opinions on my options??

thank you!