Strategy & Re-financing whilst on maternity leave

Background:
My wife owns an apartment in eastern suburbs of Syd, last valued in Jan 2015 @ $950k when we last re-financed. Have been looking at purchasing a second IP (for about a year) looking at a freestanding in inner Melb. Current have $500k loan with $270k in the offset. Combined our household income (including rental income) was $250k. With the apartment heavily positively geared our tax situation isn't ideal.

Life throws up some nice curve balls sometimes and have just had our first child. This has thrown our strategy through a loop somewhat as we are now down to 1 salary. We are lucky to be staying with in-laws to save $ until Jan 2017 when we get access to our apartment.



Options:
1. Sit tight.
Move into the apartment Jan 2017 to reset 6 year rule. Re-fiance from Investor to OO rate around 3.5%-3.8%, paying down non-deductible debt whilst on 1 salary, allowing to build more in the offset, execute when the wife goes back to work Oct 2017.

2.
Use the offset to buy (dirty word) Off the Plan. Using $150k from our offset (10% deposit ) with an 18-24 month build time. Allowing us to lock in a negatively geared / depreciating / apartment that we could live in at some point. Also giving us time for my wife to return to work making applying for a loan much easier and taking the pressure off being on a single salary.

Questions:
Given the scenarios above for re-financing and my wife on mat leave. Should we just go to get a better rate, using offset as deposit and taking out a new loan for next IP.

OR should we go through the process of re-financing upto 80% LVR and releasing equity and leaving it in offset for when we move out and the apartment becomes an IP again?

 

Re. Option 2 - do you foresee further capital or rental growth in the OTP apartment. Because otherwise you are buying something for the sake of tax. Which doesn't sound like the best driver for an investment strategy.

 

The only attractive notion for OTP is the delayed settlement, whilst the wife is on leave. I've been involved in apartments from a development point of view to know their pitfalls. As our families are split between Melb & Syd. So we'd expect to head back down to Melbourne in the next 5 years and like to have something to move into. Before the baby came along we were thinking a run down house in the inner suburbs of Melb that we could renovate before moving in. I know this would be the better option, but doubt I'll be able to arm chair renovate from afar.