How to get a rental appraisal letter for a loan (and what it needs to say)

What is a rental appraisal letter, and why does a lender ask for one?

When your loan is secured on an investment property, or when rent is part of how you will pay the loan back, the lender wants evidence of what that rent really is. A rental appraisal letter is the simplest piece of that evidence. It is a short letter from a real estate agent or property manager giving their opinion of the weekly rent the place should fetch right now.

It is an opinion about rent, not a valuation of the property’s value. If a lender also wants a figure for the price, that is a separate job, and our guide to getting a property valuation for a loan covers it.

Lenders are required to make reasonable inquiries about your finances and to verify them, which is the thinking behind ASIC’s responsible lending guidance in RG 209. In plain terms, “I get about this much rent” is not enough. They want a document from someone independent.

Appraisal letter, lease or rental statement: which one do you need?

They prove different things, and lenders often ask for more than one.

Document	What it proves	Best for
Rental appraisal letter	What the agent expects the property to rent for	Vacant, newly bought or newly built property; sanity check on an old lease
Signed lease	The rent you agreed with a tenant, and the term	Tenanted property
Managing agent’s rental statement	Rent actually collected, and whether the tenant is up to date	Established tenancies
Bank statements	Rent arriving in your account	Self-managed rentals
Bond lodgement receipt	That a tenancy exists and when it began	Backup for a new lease

If you are not sure which your lender wants, ask early. Our what documents do I need for a loan checklist shows where this fits in the whole file, and the guide to contracts of sale and lease documents covers getting copies of the lease itself.

How do I get a rental appraisal letter, step by step?

1. Ask your broker what the lender wants. Some accept any licensed agency letter. Others prefer a particular format or a recent date.
2. Pick an agency that works the suburb. Agents who manage rentals nearby know the going rate, and that is what makes the letter credible.
3. Give them the exact details. Full street address, number of bedrooms and bathrooms, parking, and any recent renovation or defects. A wrong detail can undermine the figure.
4. Ask for it in the right form. On the agency letterhead, signed, dated, with the agent’s name and licence details, your name as owner (or buyer), and the property address.
5. Ask for a weekly figure. A single number or a tight range, such as a low and a high weekly rent. “Strong rental demand” on its own is no use to an assessor.
6. Send it to your broker to check before it goes to the lender. A quick read can catch a typo in the address.

Agents often do these for free in the hope of managing the property, and that is fine. You are not obliged to sign a management agreement to receive a letter.

What should the letter actually say?

A lender-ready letter normally has:

• the date, and the agency’s name and contact details;
• the full property address and your name as owner or purchaser;
• the property type and features that drive rent;
• the estimated weekly rent (or range) on the current market;
• a line saying whether the property is currently tenanted or vacant;
• the agent’s name, signature and position.

My advice is to avoid vague wording and avoid optimistic stretch figures. An unrealistic appraisal can hurt you: if the lender’s own checks come in lower, you can be left explaining the gap.

What if the property is vacant or newly purchased?

For a vacant property, or one you are about to buy, the appraisal letter does most of the work because there is no tenancy to point to. Some lenders also use their own valuer’s rental estimate, so it helps if your letter lines up with comparable rents nearby.

If you are buying with an existing tenant, ask for the lease and the managing agent’s statement as part of the sale. Then you can give your lender both the market view and the actual rent, and the lender can see which is higher.

Not sure whether your rent evidence will stack up? Check your options with us before you lodge anything with a bank. It takes a minute, and we can tell you what a lender is likely to want to see.

What if it is already tenanted?

Now the lease and the statement carry weight. Check three things before you submit:

1. The lease rent matches the statement. A mismatch is the most common thing that slows a file.
2. The lease is current. A lease that has expired and rolled onto a periodic basis is common, and lenders may ask for a rent-increase notice or a fresh appraisal to back up today’s rent.
3. Arrears are explained. If the statement shows missed payments, tell your broker up front and say what happened. A short note that the tenant has caught up reads far better than silence.

If you self-manage, the lease, bank statements and the bond record are your evidence. Each state has its own bond authority, for example NSW’s rental bond system. The ATO also expects you to keep records of rental income, so tidy records help at tax time as well as at loan time. See the ATO’s rental property pages.

A common mistake is ordering the letter before the loan is structured. If your broker later changes lender, the new lender may want a fresher letter or a different format, and you pay for the time twice. Ordering after you know the lender costs you nothing and keeps the date recent.

How will the lender use the rent figure?

Think of it as a discount, not a pass. Most lenders do not count the full gross rent as income, because the property has costs: rates, insurance, repairs, management fees and the odd empty week. How much of the rent they accept differs by lender and by loan type, and we are not going to quote a number that will be out of date by next month.

What that means for you:

• A higher appraisal helps only if it is realistic and believable.
• Rent matters most to serviceability, which is how lenders decide what you can afford. Tenanted properties with a clean statement tend to be treated more comfortably than vacant ones.
• For a short private loan secured on the property, the lender may care more about the exit plan and the value than the rent, so the letter is a supporting document rather than the main event.

A worked example, clearly made up: an investor is refinancing a two-bedroom unit that has been vacant for three weeks between tenants. The lender wants rent evidence, so the investor gets a letter from a local agency stating a weekly range, plus a copy of the last lease and statement showing the previous tenant paid on time. The lender sees both a market figure and a track record. If the new tenant is signed before settlement, the new lease replaces the appraisal as the stronger evidence.

What if the rent does not cover the repayments?

Plenty of investors are in this spot, especially after rate rises, and it is not an automatic no. The rent is one input among your wages, business income, other properties and existing debts. Where it falls short, options can include:

• a different loan structure or term;
• bringing in other income or a guarantor;
• a non-bank or private lender that looks at the property and the exit plan, rather than a rigid calculator. See our pages on investment property loans and second mortgages for investment property;
• low doc loans if your income is hard to document in the usual way.

Looking for finance on an investment property?

Sounds like you’re after investment property finance, and rent paperwork is just one piece. We’re the lending experts in loans the banks and many brokers can’t place, so let’s see where you stand. Enquiring takes about 60 seconds and your credit file isn’t touched just for asking. We won’t spray your details around to a pile of lenders, so your phone won’t light up, and a real person will look at your situation and give you a call. Please fill the form in accurately so we can match the right option first time.

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