The theory of having as big a deposit is a good one. However for us, it was just a theory. With our first house, we borrowed everything but the kitchen sink to make it work. It was the only way we could break into the housing market as owners.

However for our second mortgage it was much easier. We were able to use the first property as security to borrow much, much less for the second place.

Now that we are about to get our third mortgage, we have a heap of cash in the bank (we sold both properties) which will be our large deposit.

Given your situation, I'd be looking at towns along the Bendigo v-line train route. Woodend, Castlemaine etc have heaps of commuters to the city and are beautiful places. Good rental returns but also lovely, lovely places to live.