Top Tips to Check the Rental Market Before You Borrow

Check the rent before you check the loan. If the rent doesn't cover the interest and running costs, you fund the gap from your own pocket every week, and your lender will see that too.

This is for tradies thinking about buying an investment property who want to know whether the numbers stack up. You can't run a rental market check from a glossy brochure. You need real rents, real vacancy data and a clear idea of what the loan will cost.

How Do You Analyse the Rental Market for an Investment Property?

Compare the rent actually achieved on similar properties nearby with the rent the seller or agent is quoting. Then check how long those properties sat empty between tenants.

Look at recent leased listings, not just current asking rents. Ask a few local property managers what a place like this would rent for and how long it would take to find a tenant. Check the vacancy rate for the postcode through a recognised property data provider. Treat any figure as a snapshot, not a promise.

A tradie has an advantage here. You know what condition a place is really in. Tired wiring, old plumbing or a dodgy roof can mean lower rent, longer vacancy and a repair bill. Factor that into your numbers before you sign anything.

What Rent Will a Lender Actually Count?

Lenders regulated by APRA generally count no more than 80 per cent of expected rent. APRA's view is that a prudent lender applies at least a 20 per cent haircut to allow for periods when the property is empty.

That haircut isn't for management fees, repairs or other holding costs. Those come on top. Lenders also tend to place less weight on a rental appraisal than on actual rent received, so a property already tenanted can be easier to assess. What evidence each lender accepts differs, so ask before you apply.

Lenders also test your ability to repay at a rate at least 3.0 percentage points above the loan's rate. Rental income helps, but it doesn't replace your own income. Use the borrowing capacity page to see where you stand before you start looking at properties.

Rent vs Interest: A Worked Example

Consider a tradie looking at a property with a $500,000 investment loan. At an illustrative rate of 6.75% p.a., interest-only repayments would be about $33,750 a year, or roughly $649 a week. This rate is an example only, and your actual rate depends on your deposit and lender.

The agent says the property will rent for $600 a week. That is $31,200 a year, which is already $2,550 short of the interest alone. And a lender counting 80 per cent of that rent is working with $480 a week.

The tradie then adds the costs the interest figure leaves out, such as council rates, insurance, repairs and property management fees. The weekly gap grows. He decides to bring the loan amount down by putting more of his own savings in and to hold a cash buffer for vacancy. With the lower loan, the rent covers more of the interest, and the property fits his budget without relying on overtime.

If the numbers only work on the agent's best-case rent, they don't work.

Interest-Only or Principal and Interest on a Rental?

Interest-only means you pay just the interest for a set period, so your repayments are lower in that period but your loan balance doesn't fall. Principal and interest repayments cost more each week because part of each payment reduces the loan.

For an investment property, the main trade-off is that interest-only keeps cash flow lighter now but leaves you owing the full amount. It also doesn't lift your borrowing power. APRA expects lenders to assess interest-only loans on repayments over the shorter remaining term once principal and interest starts, so the assessment can result in a lower maximum loan than a principal and interest loan would give you.

For comparison, the same $500,000 at the same illustrative 6.75% p.a. over 30 years on principal and interest comes to about $3,243 a month, or about $748 a week. Compare that with $649 a week interest-only and you can see what the lower payment buys you and what it costs you later. Our interest only loans for tradies page explains how this works in more detail.

Negative Gearing Rules Have Changed for New Purchases

From the 2027-28 income year, net rental losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only be deducted against other residential property income. They can no longer be deducted against your wages or business income. Losses can be carried forward to future years.

Properties held at that time, including those under contract awaiting settlement, keep the current treatment. Eligible new builds acquired after that date can also still be deducted against all income. Properties bought between 12 May 2026 and 30 June 2027 can use the current rules until 30 June 2027 only.

That changes how a property that runs at a loss behaves. A shortfall you can't use against your tradie income is just a shortfall you carry. The interest on an investment loan is still deductible to the extent the property is rented or genuinely available for rent, but only the interest part of a principal and interest repayment counts. Your accountant should confirm how this applies to you before you commit.

Holding Costs and Vacancy: Build a Buffer

Set aside enough cash to cover the loan repayments and costs for a period when the property has no tenant. How much depends on your loan, your costs and how quickly similar properties get leased.

An offset account can help hold that buffer, because it reduces the interest charged on the loan without reducing the loan balance. The trade-off is that the money is tied up and may not earn interest in a savings account. If you pull extra money out of a redraw facility for personal use, the interest on that part of the loan may not be deductible. Check with your accountant before using redraw.

If you already own a property, you may be able to use equity release loans for tradies to fund the deposit. That adds debt to your existing home, so the rental numbers need to stand up on their own.

Where to Go From Here

If this is your first purchase, read our guide to buying your first investment property. If you already own one and want to see what suits your situation, our investment loans for tradies page covers the options. See our finance for tradies page for more. Your own home loan matters here too, so see our home loans for tradies page if you're juggling both.

Call one of our team or book an appointment at a time that works for you. Bring the rent estimate, the loan amount you're considering and your current debts, and we'll work through the numbers with you.

Frequently Asked Questions