A property renting for $650 a week brings in $33,800 a year, but most lenders will only count around 80% of that when they work out how much you can borrow. That shading, combined with the buffer added to the interest rate, is why many investment loan applications come out with less borrowing capacity than investors expect. Knowing how lenders treat rental income before you apply makes it easier to set a realistic budget for the next purchase.
Why Lenders Count Only Part of Your Rent
Lenders discount rental income to allow for the costs and gaps that come with owning an investment property. Vacancy periods between tenants, property management fees, repairs, insurance and council rates all reduce what an owner actually keeps. Rather than itemise every expense, most lenders apply a flat percentage to the gross rent, typically somewhere between 75% and 80%.
The exact figure varies by lender and sometimes by property type. A few lenders use a higher percentage, while others apply a lower one to properties they view as riskier. On a rent of $33,800 a year, the difference between 75% and 80% is $1,690 of assessed income each year, and that flows straight through to the borrowing capacity figure.
What Evidence Lenders Ask For
For a property you already own, lenders usually want proof the rent is real and ongoing. That normally means a current lease agreement, recent rental statements from the managing agent, and often the rental schedule from your most recent tax return. If you manage the property yourself, bank statements showing regular rent deposits can stand in for agent statements at some lenders.
For a property you are about to buy, there is no rental history yet, so lenders rely on a rental appraisal. This is a written estimate from a local real estate agent of the weekly rent the property is likely to achieve. Some lenders also accept the rent figure from the bank’s own valuation report.
Can You Use Rent From a Property You Have Not Bought Yet?
Yes. Most lenders will include projected rent from a rental appraisal when assessing an investment purchase, applying the same shading as they would to existing rent. The appraisal needs to be recent and realistic, since an optimistic figure can be cut back if the valuer sees the property differently.
How Rent Stacks Up Against the Assessed Repayment
Shaded rent is only half of the calculation. Lenders also assess the new loan at a buffered rate, which for banks regulated by APRA means the actual interest rate plus at least 3 percentage points.
Take a $600,000 investment loan at 6.5%. Assessed at 9.5% over 30 years on principal and interest, the lender treats the repayment as roughly $5,045 a month. If the property rents for $650 a week, the shaded rent at 80% is about $2,253 a month. Your other income needs to cover the remaining gap of around $2,790 a month on paper, even though your actual repayment at 6.5% would be closer to $3,790.
This is why rental income on its own rarely carries an investment loan through serviceability. The property needs to be supported by the borrower’s wider financial position.
Where Negative Gearing Fits In
When a property costs more to hold than it earns, the loss can reduce taxable income, and some lenders factor that tax benefit back into their serviceability calculation. Lenders have handled this differently for years, and it has become more varied since the May 2026 Budget changed the tax treatment of established investment properties.
Some lenders now only credit the negative gearing benefit for newly built properties or established properties contracted before the Budget changes, and practice varies across the rest of the market. The tax rules themselves are complex, so anyone weighing how the changes affect a specific property is best served by speaking with a registered tax agent or accountant.
Short-Term Rentals and Other Special Cases
Income from short-term rental platforms is treated more cautiously than a standard lease. Many lenders want at least 12 months of booking history, may shade the income more heavily, and some will not accept it at all. Rent from a granny flat, dual-key property or room rental can also be assessed under separate rules, depending on whether the lender sees the income as stable.
Rent paid by a family member is another grey area. Lenders generally want to see a formal lease at market rent and a consistent payment history before they will rely on it.
Why the Same Rent Can Produce Different Borrowing Power
Because shading rates, evidence rules and negative gearing treatment all vary, the same investor with the same rental income can get noticeably different borrowing capacity from one lender to the next. That spread is wider in 2026 than it has been for some time, with lenders responding differently to rate rises and the Budget changes.
Comparing how several lenders treat your rental income, before choosing where to apply, is one of the simplest ways to avoid a lower approval than your situation could support.
Key Takeaways
- Most lenders count around 75% to 80% of gross rental income, to allow for vacancy and holding costs.
- Existing rent is usually verified with a lease, rental statements or a tax return, while new purchases rely on a rental appraisal.
- Lenders regulated by APRA assess the new loan at the interest rate plus at least 3 percentage points, so rent rarely covers the assessed repayment alone.
- Some lenders have limited the negative gearing benefit they count in serviceability since the May 2026 Budget changes.
- Short-term rental income and family rent are treated more cautiously and may need a longer track record.
- Rental income treatment varies between lenders, so the same investor can see different borrowing capacity at each one.