We own a debt-free house which we wish to rent out once we buy and move into another house. Is this a good strategy?

Q.

We own a debt free property with a current value of about $400k plus. Due to our children's education we wish to buy another property to live in for four to five years. The new property is priced at about $450,000 and we will be able to contribute about 50% of the price from our savings and take a loan for the rest. We propose to rent out our current property for about $400-450 per week, and we expect to pay monthly loan repayments from the rental income. We have a current combined income of about $45,000 pa. Is this a very risky option? Should we sell our current property and then buy another one?

What you propose is not inherently risky provided your income is secure and your current property will rent for the figure you say. Unfortunately there is no debt on your existing home so you will be paying tax on the rents while having a hefty non-deductible debt on the new place. Do you intend to return to your original property in the long term? If not, consider selling it tax free which should enable you to buy the new house free of debt.