Rental appraisal letters

Untitled designWhy property investors need a rental appraisal letter, and how to get one.

If you’re purchasing an investment property, odds are you’re hoping to generate rental income. The good news is that this rental income can help you before you’ve even bought your property.

When you apply for an investment property home loan, you’ll likely need to provide a rental appraisal letter. The way this letter is structured will depend on whether or not your property already has tenants.

When would I need a rental appraisal letter?

Most lenders will want to see a rental appraisal when you apply for an investment property home loan. This is because your rental income will be taken into account when assessing your home loan.

This is potentially very good news for would-be investors. Adding assumed rental income into your home loan application impacts your serviceability. In other words, it’s counted as more income you’ll have available to repay your home loan. Because of this, your borrowing power is likely to increase.

It’s worth noting that most banks won’t accept 100% of rental income. Instead, they’ll take about 80% of your rental income into account when assessing your serviceability. They do this to allow for untenanted periods, or potential loss of rental income during periods.

How do I get a rental appraisal letter?

You can obtain a rental appraisal letter by having an agent assess your property. They’ll take into account similar rental properties in the area and compare them to your property to estimate the amount of rent you’re likely to receive.

If the property is already tenanted, an agent will be able to provide a letter stating the current amount of weekly rent. They may also state that they believe this amount to be fair relative to the market.

Some lenders may wish to carry out their own assessment. In this case, they will send a valuer to the property to assess the potential rental income. This figure can end up being more conservative than one provided by an agent.

There are also other methods of proving rental income if a property is tenanted. The property manager should be able to provide a rental statement or copy of the lease agreement.

What should I look for in a rental appraisal letter?

A rental appraisal letter will need to include a few details:

  • The agent’s letterhead, including contact details
  • The date
  • The address of the property
  • Whether or not the property is tenanted
  • The projected rent (if untenanted)
  • Comparable properties used to project rent (if untenanted)
  • Current rent (if tenanted)
  • Agent’s signature

Sample letters

Below are some samples of rental appraisal letters for both tenanted and untenanted properties.

Tenanted

Red Blazer Property Management
(00) 0000-0000

To whom it may concern,

We are the managing agents of the property at 123 Fake Street. This property is currently tenanted at a rent of $750 per week. Based on our assessments, we believe this to be a fair market rent.

Thank you,
Joey Joe Joe, Jr. Shabadoo
ABC Property Management

Untenanted

Globochem Property Management
(11) 1111-1111

To whom it may concern,

We have appraised the property at 15201 Maple Systems Road and believe this four-bedroom, three-bathroom detached house will generate weekly rent between $650 and $750, particularly with the recently added extra storey. We reached our assessment taking into account the size and condition of the property, as well as comparable rental properties in the area:

742 Evergreen Terrace ($725 per week)
1 Ocean View Drive ($620 per week)
Cnr Croesus and Mammon Avenues ($800)

Regards,
Hank Scorpio

Need an investment property home loan? Compare your options

Rates last updated May 21st, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.99%
3.99%
$0
$0 p.a.
80%
Refinance to this loan and you could get $1,000 in your USaver account (offer conditions apply). Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
5.17%
$600
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90%
Competitive rates for fixed for 3 years with redraw facility.
3.88%
3.88%
$0
$0 p.a.
70%
You'll need at least a 30% deposit to get this low investor rate. 100% online application process.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
4.09%
4.79%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available with a 10% deposit. Available in QLD, NSW and ACT only.
4.15%
4.76%
$600
$0 p.a.
90%
A competitive rate with no ongoing fee and borrow up to 90% LVR.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.60%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.50%
4.82%
$600
$0 p.a.
90%
A variable interest-only loan to fund your investment. Get this loan with a 10% deposit.
4.09%
5.28%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.93%
$0
$0 p.a.
95%
A low deposit investment loan with a discounted, competitive rate from one of the big 4 banks.
4.19%
5.49%
$600
$8 monthly ($96 p.a.)
90%
Lock in your investment repayments for 3 years with one of the big 4 banks. Available with a 5% deposit.
3.99%
4.02%
$0
$0 p.a.
80%
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
4.65%
4.69%
$600
$8 monthly ($96 p.a.)
90%
You can get this variable investment product with a 10% deposit. The loan has limited fees.
4.55%
5.39%
$499
$0 p.a.
95%
Fix your investment mortgage repayments for 3 years. Available for investors with just a 5% deposit.
4.29%
5.39%
$0
$395 p.a.
95%
Enjoy advantage package discounts on financial products on this investor mortgage. $1,500 cashback offered to refinancers. Conditions apply.
4.79%
5.44%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
A variable rate loan for investment. Suitable for customers borrowing $1 million or more to buy a property.
5.59%
$0
$395 p.a.
90%
Make interest-only repayments and unlock equity in your home. Combine your mortgage, credit card and transaction account for discounts.
5.79%
5.93%
$600
$8 monthly ($96 p.a.)
95%
Purchase an investment property with a variable rate mortgage from one of the big 4 banks. No settlement fee.
4.09%
5.46%
$0
$395 p.a.
90%
Get 5-15% discounts on insurance products with this package investment loan from CommBank. Available with a 10% deposit.
4.19%
5.47%
$0
$395 p.a.
95%
Fund your investment with a low deposit package loan from ANZ. Bundle your loan with credit card and bank account for discounts.
4.54%
4.85%
$0
$299 p.a.
80%
Borrow $1 million or more and maximise your investment strategy with this interest-only mortgage.
4.89%
5.50%
$0
$395 p.a.
95%
A low deposit package investment loan. Fix your rate and plan your repayments for years in advance.
4.39%
4.23%
$0
$198 p.a.
70%
Fund your property investment with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
4.24%
4.55%
$0
$299 p.a.
80%
A loan for investors borrowing $1 million or more. The product includes a 100% offset account.

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