My Fortnightly after tax income is $1500. I have been paying $500 p/week off current IP mortgage but want to slow these payments down before it becomes positively geared and use some of my $$ on another place. I have been saving a fair bit of $$$ additionally to a savings account. I pay a minimal amount of board. I have also saved the $12000 in readiness for purchase costs on a second IP.
Personal opinion only, as always, but I don't think positive cashflow should be a priority at this point for you. You can afford it. Not saying you should go crazy on the -ve cashflow but a bit of -ve cashflow shouldn't be a problem for you right now. Your income will go up, and if you keep your savings ratio you should be ok. In your situation you really should be aiming to get as much gross assets as you can. Of course, you have to be able to comfortably afford the -ve cashflow, but I wouldn't aim for +ve cashflow as a priority. I would aim for 'manageable negative cashflow'.
Note I use '+ve/-ve cashflow' instead of '+ve/-ve gearing'. They're NOT the same, and it's important to understand the difference.
Imagine that you've started a new business, say a coffee shop. Should you aim to make profits on that one cafe, or aim to plough more money into the business and open a few more shops? The former leads to owning, eventually, the neighbourhood coffee shop. It might be very profitable but it's only one. The second might lead to becoming Starbucks. Losses in the early stages of a business is normal, and you're starting a business.
I know it is wise to buy a second IP but don't want the feeling of being locked into big debt at this stage. My current mortage is really manageable. I guess as you said a 30 year term is not a big problem however...
I disagree. This is THE best time for you to be locked into big debt. Why? Because the debt is for appreciating assets, and that lets you use your greatest asset: time. If you want to develop as a property investor, get used to big debt. I mean, would you prefer to have big debt when you're married, have a couple of kids who need to go to private school, and you are first in line to get the chop as part of bloated middle management? Or now, when you basically have no responsibilities, can do what you want with your money with years of rising income ahead of you?
Is the feeling of being locked into debt worth a couple of million extra dollars to you when you most need it? That's the choice you're facing here. I'm at an age when I'm really starting to 'need' money (marriage, buying my own place, possibly kids), and there is a HUGE difference between those who invested and those who didn't. EVERYONE I know wishes they had bought property when I did.
By the time I was 24, I was making $45k a year and had $300k in debt. As long as the cashflow works (i.e. you can afford it), it really isn't a big deal. Looking back, do I regret locking myself into such 'big debt' when I was young (I'm 30 now)? Heck no. Those 2 IPs now form the basis of my portfolio, and all the stuff I've been able to do and will do stems from that.
The younger you are, the more you have to think about the future. Ask someone 20 years older than you whether they would have preferred to buy another (or even one) IP 20 years ago. I bet they would answer 'well, if I had had the money / chance / income I would definitely have bought a / another place!'
You have the opportunity not to have those regrets when you're 45.
Alex