# Rental Income - used to calculate one's borrowing potential?

#### mini2

Hi all,

I've tried to search but it returns a blank page anyway, I am in the market for an IP and just wondering in calculating how much I can borrow, is rental income (actual or projected) are taken into consideration?

#### Propertunity

.... in calculating how much I can borrow, is rental income (actual or projected) are taken into consideration?

Yes, 75-80% (depending on which lender) of the anticipated rental is taken into account. The valuer and the selling agent's PM department will both give a rental appraisal figure which the lender will use in their calcs.

#### marg4000

I've heard 70% is taken into account, but Propertunity is probably more up to date than I am.
Marg

#### mini2

Thanks for the reply - what if the property I am looking at is already leased out? Will the calculation be 70-80% of what it is currently leased for?

#### Propertunity

... what if the property I am looking at is already leased out? Will the calculation be 70-80% of what it is currently leased for?

Yes, as long as it is not "out-of-line" with the market.

For example, just because you found someone desperate and therefore willing to pay \$500pw for a property that would normally rent for \$300pw, does not mean the lender will allow 75% of \$500pw. It will be the \$300pw figure they use.

#### Rolf Latham

AMP and others will allow 100 % of rental

BUT remember that the amount of rental allowed is only on variable in he equation.
With only one or 2 IPs, there are other things that have more relatove impact

Some of these are

Does the lender allow neg gearing
How do they treat existing debt, as it is, or geared up to their Plug rate plus PI.

ta
rolf

#### rugrat

IMB will take 90%

#### mja

Agreed - IMB's serviceability calculator does rock much.

#### Dazz

I am in the market for an IP and just wondering in calculating how much I can borrow, is rental income (actual or projected) are taken into consideration?

Depends on what the IP is and who the Tenant is.

If the Tenant is the State Govt and signed up and locked in for 10 years, then they'll take 100%.

If the Tenant is Mr and Mrs Peabody and they are tentatively looking at perhaps maybe signing a 6 month Lease if he can find some work soon, then they'll probably take a bit less than 100%.

If it was your money that was being borrowed, what would you reckon ??

#### Peter_Tersteeg

Lenders take a percentage of rental income (residential property) as already noted.

There are costs associated with holding in the property which lenders don't list, such as rates, management fees & maintenance. Using a % of the actual income instead of the full income thus allows for these costs.

#### BayView

Lenders take a percentage of rental income (residential property) as already noted.

There are costs associated with holding in the property which lenders don't list, such as rates, management fees & maintenance. Using a % of the actual income instead of the full income thus allows for these costs.

dang; beat me to it PT.

yes; I'd be factoring no more than 80% of the total income for both your personal income and rental income combined when you do your numbers.

Just an old dad type trying to keep you kiddies safe.

Another of my old classics - as most have heard millions of times by now is allow for 20% per year of your rent to be eaten up by costs of all sorts.

If you allow for this and the numbers still don't scare you off, you are probably pretty safe.

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