A commercial property earning $180,000 a year in rent can still get knocked back for a loan if the owner’s tax returns tell a messier story. Self-employed income, complex company structures, or a business only two years old can all make a standard application harder than the numbers deserve. Leasedoc lending exists to solve exactly that problem, by assessing the loan on what the property earns rather than what the borrower’s financials show.
What is a leasedoc loan?
A leasedoc loan is a form of commercial property finance where the lender bases serviceability primarily on the rental income the property generates, evidenced by the lease itself, rather than the borrower’s full financial statements or tax returns. Where a standard commercial application relies on two to three years of financials, a leasedoc application relies on the lease agreement, the tenant’s rent roll, and sometimes a rental appraisal.
This makes leasedoc loans a specific tool for a specific problem: a tenanted commercial property with strong, provable rental income attached to a borrower whose personal or business financials do not tell the full story. It is not a shortcut around scrutiny, it is a different set of evidence altogether.
How lenders assess a leasedoc application
Rather than calculating serviceability from net profit or taxable income, a lender working from a lease document typically applies a percentage, commonly around 75% to 80%, to the gross annual rent to arrive at an assessable income figure. That figure is then measured against the proposed loan repayments to confirm the loan can be serviced from the rent alone.
Take a property leased for $100,000 a year. A lender applying an 80% factor would treat $80,000 as the assessable income, then test whether that figure comfortably covers the proposed repayments at the assessment rate. The remaining rent buffer covers costs like council rates, land tax, insurance, and vacancy risk that the landlord carries. A property with a long lease term remaining and a financially sound tenant will generally assess more favourably than one with a short lease or a tenant on a month-to-month arrangement.
Who actually uses leasedoc loans
Leasedoc lending suits investors buying an already-tenanted commercial property where the numbers on the lease are strong but the borrower’s own income is difficult to document, self-employed borrowers whose tax returns lag behind their actual trading position, and portfolio investors who would rather lean on an asset’s rental strength than assemble a full financial package for every purchase.
It is less commonly used, and less useful, for a business owner buying premises to occupy themselves, since there is no external tenant lease to assess against. That scenario usually sits better under a standard or low doc commercial loan application instead.
Do leasedoc loans require a bigger deposit?
Generally, yes. Leasedoc loans typically max out around 60% to 65% loan-to-value ratio, compared with up to 70% for a fully documented commercial application with strong financials. The lower LVR offsets the reduced financial verification, and there is no lenders mortgage insurance option on commercial lending the way there is for a standard home loan, so the deposit gap has to be covered in cash or equity.
What matters most to the lender: the lease, not just the rent
Two properties earning the same rent can be assessed very differently depending on the lease behind that income. Lenders look closely at the lease term remaining, whether the tenant has a renewal option, the tenant’s payment history, and how easily the space could be re-let if the tenant left.
A property leased to an established business on a 5-year term with options will typically assess more strongly than the same rent from a tenant on a short rolling lease. Where a lease is due to expire soon after settlement, lenders may factor in vacancy risk or ask for evidence the tenant intends to renew before they finalise terms.
Leasedoc vs low doc vs full doc, what’s the difference?
Full doc lending assesses the borrower’s actual financials, tax returns, and BAS. Low doc lending accepts a signed income declaration alongside limited financial evidence, and can apply to owner-occupied or investment purchases depending on the lender. Leasedoc sits apart from both because it is not really assessing the borrower’s income at all. It is assessing the property’s rental income, which is why it only applies to tenanted commercial and investment security, not premises a borrower plans to occupy themselves.
Because loan structure and interest deductibility depend on how a commercial purchase is set up, borrowers considering a leasedoc loan should get advice from a qualified accountant before deciding how to hold the property.
Key Takeaways
- Leasedoc loans assess serviceability from the property’s lease income, not the borrower’s tax returns or financials.
- Lenders typically apply 75% to 80% of gross rent as the assessable income figure.
- Leasedoc loans generally max out around 60% to 65% LVR, lower than a fully documented commercial application.
- The strength of the lease term, tenant, and renewal options matters as much as the rent figure itself.
- Leasedoc suits tenanted investment purchases more than premises an owner intends to occupy themselves.
- Loan structure decisions should involve a qualified accountant given the tax implications of how the property is held.