Finance with no tenants

Just wondering how the banks treat vacant IPs?

I have been considering buying a beach house for some time. One thing that weighs on me when deciding whether to go ahead with purchasing such a large luxury is the impact it might have on serviceability. Particularly in light of the changes with APRA and considering that at some point in the future I may want to upgrade my PPOR.

Obviously it is likely to have a negative impact, nevertheless:

I'm wondering, will the bank require the property to be leased before approving finance or would a rental appraisal suffice? Particularly as where I am looking does not have the strongest rental demand. i.e. if in the future I want to upgrade my PPOR and the bank requires more serviceability can I use potential income from the beach house to satisfy the bank.

Also, how do the banks treat Air BnB income in light of the new changes to APRA?

 

Depends on the lender - some will take a rental appraisal letter from an agent and others like Liberty will simply not take it on if the property is under construction or vacant.

Re the AirBnB question - lenders will take the lower of a rental appraisal letter and tax returns.

In this case a lender like Liberty will take a rental appraisal letter provided that its the lower figure from the tax returns (by exception).

 

The easiest way is a tax return to prove rental income.

 

Okay, so if I'm using it as a beach house for a few years and I want some more money from the bank I can get it, from most lenders, so long as I have a rental appraisal saying that it will rent out for x amount of dollars and if, due to the place I'm looking at having low rental demand, after a couple months it is still vacant I should be okay?

Is the tax return a double edged sword? i.e. If I'm showing losses and therefore a reduced income do they take the income figure from the tax return over my pay slips and rental statements?

 

They will still look at your payslips and other rentals as per normal and then go off the gross income figure from the tax return for holiday rental and shade that by 40%.

Another option I've seen is to treat that property like a mini business and add back the loan interest (already accounted for in servicing) and depreciation to arrive at the true income for servicing.

 

I would probably agree with Tom with the simplest way.