Proven tips to buy a holiday rental without the fluff

A holiday rental looks like passive income until you factor in the holding costs during low season.

Plasterers earning consistent income through contracts or ABN work can access investment loan products designed for property investors, but the numbers only work if the property covers its own costs most of the year. Most lenders assess holiday rental serviceability at 70 to 80 per cent of market rent because booking platforms don't guarantee occupancy. That means you need a larger deposit or higher personal income to qualify compared to a standard long-term rental.

Can you service an investment loan on seasonal rental income?

Lenders calculate serviceability using your salary or ABN income plus a percentage of expected rental income. For a holiday rental, lenders typically apply a 70 to 80 per cent haircut to the rental figure you provide, depending on the location and booking history. If you're buying in a coastal town with strong summer demand but low winter occupancy, the bank assumes the property will sit empty for part of the year.

Consider a plasterer earning $95,000 a year who wants to buy a holiday unit. The property generates $650 a week during peak periods but averages $400 a week across the full year. The lender will assess serviceability at around $280 to $320 a week, not $400. That reduced income estimate affects how much you can borrow, especially if you already have a mortgage on your own home. You'll need to prove your personal income can cover the shortfall during quiet months.

Most finance for tradies applications include a rental appraisal or an estimate from a property manager familiar with the area. For holiday rentals, some lenders also want evidence of similar properties' booking rates on platforms like Airbnb or Stayz. If you're buying in a location with year-round demand, such as a regional town near major infrastructure projects, you'll have more income recognised in the serviceability calculation.

Interest-only loans and cash flow during the off-season

An interest-only investment loan lets you reduce monthly repayments during the first few years, which helps if the property isn't fully booked. You're only paying the interest portion, not reducing the loan balance, so your cash outflow is lower. This structure works well for holiday rentals where income fluctuates month to month.

For an investment loan amount of $400,000 at current variable rates, switching from principal and interest to interest-only could reduce monthly repayments by $800 to $1,000. That difference can cover a shortfall during winter or fund maintenance between guests. The loan reverts to principal and interest after the interest-only period ends, typically five years, so the repayments increase at that point.

Interest-only investment loan products are widely available from lenders across Australia, but approval depends on your serviceability and the property's loan to value ratio. Most lenders cap interest-only lending at 80 per cent LVR for investment properties. If you're borrowing above that threshold, you'll likely need to structure the loan as principal and interest from the start, or reduce the loan amount by increasing your deposit.

Negative gearing and the 2027 rule change

Under current tax rules, losses from a holiday rental, including loan interest, council rates, and body corporate fees, can be offset against your income from plastering work. That's negative gearing. If your property costs $35,000 a year to hold and earns $28,000 in rental income, the $7,000 loss reduces your taxable income.

From the 2027-28 financial year, established holiday rentals purchased after 12 May 2026 can only offset losses against income from other residential properties, not against wages. Losses can be carried forward and used in future years when the property makes a profit or when you sell. New builds are exempt and retain full negative gearing. If you're looking at an established unit in a resort complex, the tax treatment changes depending on when you settle. Properties under contract before 12 May 2026 are grandfathered under the old rules.

The capital gains tax treatment also shifts from 1 July 2027. Gains accruing after that date will be taxed using cost base indexation and a 30 per cent minimum rate, replacing the 50 per cent discount. For a property owned before that date, the gain is split: the portion up to 1 July 2027 uses the old discount, and the portion after uses indexation.

Variable or fixed rate for a holiday rental investment loan

A variable rate investment loan gives you flexibility to make extra repayments or refinance without penalty. A fixed rate locks in your repayments for a set period, typically one to five years, but you can't pay down the loan faster without incurring break costs.

For a holiday rental, most plasterers choose variable or a split structure, where part of the loan is fixed and part is variable. That lets you lock in some certainty while keeping the ability to pay down the variable portion if you have a strong booking season. Fixed rates don't protect you from changes in rental income, only from rate rises. If your rental income drops during a slow year, the loan repayment stays the same regardless of the rate type.

Variable rate investment loans typically come with offset accounts and redraw facilities. An offset account lets you park rental income and reduce the interest charged on the loan. For a property that earns $3,000 one month and $500 the next, an offset account smooths the impact on your cash flow by reducing interest during high-income months.

Deposit size and LMI on investment loan applications

Most lenders require a 20 per cent deposit for an investment property loan to avoid Lenders Mortgage Insurance. If you're borrowing more than 80 per cent of the property value, LMI is added to the loan or paid upfront. The premium varies by loan amount and LVR, but it's typically several thousand dollars on a $400,000 loan at 90 per cent LVR.

Some lenders offer LMI waivers for specific professions, but those waivers rarely extend to investment loans. You can use equity from your existing home to fund the deposit on a holiday rental, but the lender will assess your ability to service both mortgages. Releasing equity doesn't reduce the total amount you owe; it shifts debt from one property to another.

If you're buying in a regional coastal town with limited comparable sales, some lenders apply stricter LVR caps, such as 70 or 75 per cent, because they view the location as higher risk. That means you need a larger deposit even if you're willing to pay LMI. Postcode-based lending restrictions are common for holiday towns with seasonal economies.

Choosing between a long-term tenant and short-term bookings

Some plasterers buy a holiday property with the intention to rent it short-term but find it harder to service the loan than expected. Switching to a long-term tenant, even at a lower weekly rate, can improve serviceability and reduce the time spent managing bookings. A property that earns $400 a week with a permanent tenant will be assessed at close to that full amount by the lender, compared to 70 per cent of $400 for a holiday rental.

If you're refinancing an existing investment loan or applying for a second property, showing 12 months of stable rental income makes the application simpler. Lenders treat long-term residential tenancies as lower risk than holiday bookings, even if the holiday rental generates higher gross income. You can explore investment loan refinancing for tradies to move between loan structures as your rental strategy changes.

Some councils restrict short-term letting through local planning laws, or require a permit for properties rented for less than 90 days at a time. Body corporate rules in apartment complexes can also limit or ban holiday letting altogether. If you're buying into a strata scheme, check the by-laws before signing the contract. A property that can't be used for short-term letting loses most of its appeal as a holiday rental investment.

Claimable expenses and maximising deductions

Interest on your investment loan is fully deductible, as are property management fees, insurance, council rates, repairs, and depreciation. For a holiday rental, you can also claim cleaning costs, booking platform fees, linen, and advertising. If you use the property yourself for part of the year, you need to apportion expenses based on the time it was genuinely available for rent.

The ATO requires you to keep records showing the property was advertised and available. If you block out school holidays every year for personal use, you can't claim the full year's holding costs. For a property that's rented 40 weeks and used personally for 4 weeks, you can claim deductions for the 40 weeks only, plus the time it was advertised but vacant.

Depreciation on fixtures, fittings, and the building itself can add several thousand dollars a year in deductions, but it requires a quantity surveyor's report. That report costs around $600 to $800 and itemises everything from carpet and blinds to hot water systems and air conditioning. Depreciation doesn't require any cash outflow, so it's one of the few deductions that improves your tax position without increasing your costs.

Call one of our team or book an appointment at a time that works for you. We work with home loans for plasterers and investment loan options from lenders across Australia who understand how seasonal income and ABN structures affect borrowing capacity.

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