Using FHOG to start a property investment portfolio.

Hi all,

I am in a strange situation, but aren't we all.
I am a kiwi and my boyfriend is Irish (read not aust perm resident so he can't get a mortgage more than 80% LVR).
I earn enough to qualify for a loan on my todd for 200k but when the immigration dept come to the party and allow him residency, hopefully within 3 months, that figure will rise dramatically as he is a tradeaman in Sydney so very good income.
So my solution was to go and buy something myself, in my own name and rent it for 11 months, hopefully I would find a place currently tenanted and I could just move in and stay there for 6 months (to qualify for the FHOG) and renovate and rent for a higher amount once the 6 months was up.

A few main points

– for the amount I can borrow I would have to go to regional NSW and as I currently work in Sydney City and need to retain this job to meet mortgage repayments it has to look legit that I can commute to work at least a few days a week as I can work from home also
– we currently rent in Bondi and this is where we want to live and we will never be able to afford to buy here so we may as well utilise the FHOG now to help with the buying costs, my partner would by staying in Bondi as he needs to get up very early for work in the city so living far out would not suit him
– I have been approved for 100% finance on a OWNER OCCUPIED property and my broker understands my plan to move into the place within 12 months and commute to work, he would only lend me 95% on an investment property and we only have about 7k cash saved, this way I don't have to touch my 7k, all costs will be covered by FHOG.
– I currently own a 33% share in an IP in NZ, brother and parents own the other 66%, I have about 20k equity in that but as its a brand new mortgage (april) I can't redraw for 12 months to give me CF so my broker has chosen to leave this property out of the finance equation
– my partner and I are 50/50 on costs repayments etc even though the property is in my name, this would be the same with the new acquisition

So my questions is how does residing in an IP affect tax deductability?
For the first 11 months the property would be negatively geared however once I have moved in and renovated the rent will be upped to make it CF+.

I have found a diamond in the rough that I am going to view this weekend but I want to make sure I am not being a fool.
Just drove 6 hours each way to Dubbo on Saturday but no luck there as I don't think I could live there and I have to for 6 months to get the 7k.

Has anyone heard anything about the FHOG being used for investments?
I have every intention of fulfilling the requirements and occupying for 6 months and I am lucky to have a boyfriend who is a plumber, a mate who is a carpenter and a dad who is a painter/gyprocker (who would love a free flight over here in exchange for his labour) so renovation shouldn't be too much of a problem.

Sorry for the essay,
Thanks in advance for any advice offered.

Emma