Holiday Rentals & What Not to Miss Before You Borrow

Buying a holiday rental property around Jindabyne, Thredbo or Perisher sounds straightforward until you discover most lenders treat short-term accommodation differently from a standard long-term rental.

The rental income you can prove matters more than the income you hope to earn, and the way you structure your loan now will shape how much tax relief you get from 1 July 2027 onwards. If you're considering a ski lodge apartment or a lakeside cabin for Airbnb guests, you need to understand how lenders assess vacancy, how the new negative gearing rules work, and which loan features actually suit a property that sits empty half the year.

Lenders Discount Your Rental Income More Than You Expect

Most lenders will only accept 70 to 80 per cent of your estimated rental income when they calculate your borrowing capacity for a holiday rental. Some won't accept any income estimate at all unless you have an existing lease or a management agreement showing historical returns. In a scenario where you're buying an apartment in Thredbo that you plan to list for short stays during snow season, the bank may assess your borrowing power using zero rental income and your own salary alone, even though you're confident the property will earn $40,000 a year in peak months.

The lender applies this discount because short-stay properties in alpine areas can have seasonal vacancy rates of 40 per cent or more outside winter. They also know cleaning costs, management fees and maintenance eat into your actual return. If you're relying on that rental income to service the loan, a lender that shades your income too heavily can cut your maximum loan amount by $100,000 or more compared to a long-term rental in Cooma with a signed 12-month lease.

The New Negative Gearing Rules Change the Way You Should Structure This Purchase

If you buy an established holiday property on or after 7:30pm on 12 May 2026, you won't be able to offset your net rental loss against your salary from 1 July 2027 onwards. The loss gets quarantined and can only be used against other residential rental income or future capital gains on the property. For a salaried buyer purchasing a $650,000 ski apartment with interest-only repayments and seasonal rental income, that could mean an extra $8,000 to $12,000 in tax each year compared to the old rules.

Buying a new build changes that outcome entirely. If the property qualifies as an eligible new residential dwelling, you retain full negative gearing and you also get to choose between the old 50 per cent capital gains discount and the new indexed cost base with a 30 per cent minimum tax rate when you sell. In our experience, buyers who assumed an off-the-plan apartment qualified as a new build have been caught out when the developer's approval showed it was a knock-down rebuild on an existing lot without an increase in dwelling numbers. That single detail removed two separate tax concessions and added years to the time it would take the investment to break even.

How Interest-Only Loans Work When Your Property Earns Nothing for Months at a Time

An interest-only loan lets you pay only the interest portion of the debt for a set period, usually five years. The benefit is lower monthly repayments, which matters when your rental income arrives in bursts rather than every fortnight. Consider a buyer who purchases a two-bedroom unit near Lake Jindabyne and rents it through a holiday management service. The property earns $28,000 during the six months covering winter and summer long weekends, but sits empty or earns close to nothing between March and May and again in October and November.

With an interest-only investment loan, the repayments stay constant at roughly $2,400 a month regardless of whether the property is booked. With a principal and interest loan at the same rate, repayments would be closer to $3,200 a month. That $800 difference each month gives the buyer breathing room during the quiet periods when there's no rental income to cover the shortfall. Once the interest-only period ends, the loan reverts to principal and interest and the repayments increase sharply, so you need a plan for either refinancing or adjusting your cash flow at that point.

Variable or Fixed Rates for a Property with Unpredictable Income

A variable rate gives you flexibility to make extra repayments during the busy months without penalty, and you can usually redraw those funds if you need them to cover a repair or a string of vacant weeks. A fixed rate locks in your repayment amount, which makes budgeting easier, but you'll pay break costs if you want to refinance or sell before the fixed term ends, and most fixed loans don't allow extra repayments beyond a small annual limit.

For holiday rentals in the Snowy Mountains, we regularly see owners who need access to a redraw or offset account because their income is lumpy and their expenses are not. A new boiler in July, re-stumping after a wet winter, or body corporate levies for snow clearing can arrive at short notice, and a fixed loan without redraw means you're drawing on a credit card or personal savings instead of your own loan repayments. If you do prefer the certainty of a fixed rate, splitting the loan so that part is fixed and part is variable gives you some cost protection and some flexibility, though not every lender offers that structure on investment loans.

Deposit Size and Lenders Mortgage Insurance on Higher-Risk Properties

Most lenders will ask for a 20 per cent deposit on any investment property to avoid Lenders Mortgage Insurance. Some lenders treat holiday rentals as higher risk and require 30 per cent, particularly if the property is in a resort precinct with high body corporate fees or a history of oversupply. If you're borrowing with a 10 or 15 per cent deposit, expect to pay LMI and expect some lenders to decline the application outright if the property is zoned for short-stay accommodation or located in a building with more than 50 per cent non-owner-occupied units.

LMI on a $600,000 loan with a 10 per cent deposit can add $20,000 or more to your upfront costs, and that premium is higher again if the lender views the security as specialist or regional. You can capitalise the LMI into the loan, but doing so increases your borrowing and cuts into the equity you'll have available if you want to buy a second property later. A larger deposit also improves your interest rate, sometimes by 0.20 to 0.40 percentage points, which over the life of the loan will often save you more than the LMI premium you avoided.

Claimable Expenses and Why They Matter More for Short-Stay Properties

Interest on your loan, property management fees, cleaning between guests, council rates, insurance, repairs and depreciation on fixtures are all claimable expenses against your rental income. For a holiday rental with high turnover, cleaning and management fees can run to 30 per cent of your gross rent, compared to 10 per cent or less for a long-term let. Those higher costs increase your deductions, but they also increase the size of your net loss if your income doesn't cover them.

From 1 July 2027, if your property was purchased after 12 May 2026 and isn't a qualifying new build, that loss stays quarantined. You can't use it to reduce your tax on your wage. You carry it forward and apply it when you sell or when you earn rental income from another residential property. If you're buying with the assumption that negative gearing will reduce your tax bill each year, check the purchase date and the property's eligibility status before you sign anything.

What to Ask Your Broker Before You Apply

You need to know which lenders will accept short-stay rental income, what shading percentage they apply, and whether they'll lend in the postcode you're targeting. Not every lender will touch a property in Perisher Village or Thredbo, and some will lend there but only at loan-to-value ratios below 70 per cent. You also need to know whether the loan product includes redraw, offset, and the ability to switch between interest-only and principal and interest without refinancing.

If you're planning to use equity from your home to fund the deposit, ask how the lender will structure the split and whether cross-securitisation will limit your options if you want to sell one property later. If you're buying a new build to access the tax concessions, ask your broker and your accountant to confirm the property meets the definition in the legislation before you exchange contracts. A refinancing specialist can also review your current home loan to make sure you're releasing equity at the lowest possible rate.

Call one of our team or book an appointment at a time that works for you. We'll walk through your numbers, your timeline, and the lenders that will actually lend on the property you have in mind.

Frequently Asked Questions