Part 1: The "80% Rule" (Rental Shading)
Novice investors often calculate their budget like this:
"My salary is $100k + Rent is $25k = Total Income $125k."
The bank calculates it differently.
Banks assume that your property will not be tenanted 52 weeks a year. They assume you will have vacancies, agent fees, and maintenance costs. To account for this risk, they "Shade" (discount) your rental income, usually by 20%.
| Real World Income | Bank Assessment (80%) |
|---|---|
| $500 per week | $400 per week |
| $26,000 per year | $20,800 per year |
Not all banks use 80%. Some specialist lenders (Tier 2) allow us to use 90% of rental income. If your servicing is tight, moving from a Major Bank (80% shading) to a Specialist (90% shading) can unlock an extra $40,000 - $50,000 in borrowing power.
Part 2: "Proposed" vs. "Existing" Rent
There are two types of rental income we put on an application, and they require different proof.
1. Existing Rent (Properties you already own)
If you already own an investment property, we need to prove the current income.
The Proof: A current Lease Agreement OR a Rental Statement from your agent (less than 90 days old).
2. Proposed Rent (The property you are buying)
If you are buying a new investment property, you don't have a tenant yet. But we can still use the future rent to help you buy it.
The Proof: A "Rental Appraisal Letter" from a local Real Estate Agent. This letter estimates what the property will rent for. We give this to the bank, they apply the 80% shading, and add it to your income immediately.
Part 3: The "Negative Gearing" Add-Back
This is where investment lending gets powerful.
If your new loan interest is higher than your rental income (Negative Gearing), you make a loss. The ATO allows you to claim this loss as a tax deduction.
The Bank's View: Because you will pay less tax, your "Net Monthly Income" actually goes up. Many lenders will add these tax benefits back into your servicing calculator, further boosting your borrowing power.
Part 4: The Airbnb / Short-Stay Problem
In 2026, many investors prefer Airbnb because the yields are higher.
"Why accept $500/week on a lease when I can get $1,500/week on Airbnb?"
The Trap: Banks hate Airbnb income. They view it as unstable and seasonal.
- Standard Policy: Most banks will NOT accept Airbnb income unless you have 2 years of tax returns showing consistent profit.
- The Fix: If you need the rental income to get the loan approved, it is often safer to put a standard 12-month lease in place first. Once the loan is settled, you can switch to Short Stay later (subject to council rules).
Part 5: Rental Reliance
Be careful if you are building a large portfolio. Some banks have a "Rental Reliance" policy.
If more than 40% of your total income comes from rent (rather than your salary), some lenders classify you as a "Professional Investor" and apply stricter credit policies or lower Loan-to-Value Ratios (e.g., max 70% LVR).
Conclusion: Maximise Your Yield
Using rental income correctly is the difference between getting stuck at 2 properties or growing to 5. We know which lenders shade at 80% and which shade at 90%.