Rule of thumb $1k rent p.a. = $X borrowing?

Hi All

Does anybody have a rule of thumb in this environment - for each $1k per annum of gross rent what does this equate to in terms of additional borrowing power?

Thank you

 

Perhaps none. The net rent for the property (ie rental income - expenses and outgoings) may be more a issue. Many lenders will allow some +ve geared net rents as servicing income but if its neg geared they may reduce income available for servicing.

Your broker is best to guide specifics. Lenders also vary with how they calc servicing. Receipt of rental income itself wont directly add to borrowing capacity

 

At a guess I'd say it's about $5k - $10k borrowing power for every $1k/yr rental income.

That's very, very rough though. Borrowing calculators are significantly more complex than any rule of thumb can accomodate. You should definitely not rely on this at all.

 

Very roughly it's 3.3 to one $3.30 of net Rental to $1 of interest ratio

As @Peter_Tersteeg said it is the net rental (which could be the gross rental where the tenant pays all the cost)

 

5.5 multiplier a few years ago.
Its now more variable because of differing assessment rates, and closer to a 7.5 multiplier with lower assessment rates.

 

Very hard to answer cause depends on your tax rate and also depends on what percentage shading the banks are using.

 

Thank you brains trust.

I can see now why people run out of borrowing power, even with very low interest rates.

Very helpful.