Article

Should You Keep Your Old Zetland Unit as an Investment Property?

Thinking of upgrading but keeping your Zetland unit as an investment? Here’s exactly how lenders assess the plan, how much rent they’ll count, and what numbers to check this week before you commit to a second property.

Published 2 Aug 2026Updated 16 Sept 2026Reviewed 16 Sept 20266 min read

Key Takeaway

Lenders will generally allow Zetland owners to keep their old unit as an investment when upgrading, but they reclassify the first loan as investment debt, shade rental income to around 70–80%, and apply a 3% APRA serviceability buffer to both loans. In high-density areas like Green Square, extra LVR caps and conservative valuations are common, affecting usable equity. The actionable step is to model post-upgrade cashflow and borrowing capacity with realistic rent and costs before signing a contract.

Should You Keep Your Old Zetland Unit as an Investment Property?

This topic is covered in full on Tailored Loans Sydney

Read the full guide on tailoredloans.sydney

Keeping your old Zetland unit as an investment is possible, but lenders only support the plan if the numbers work after they shade your rent, tighten valuations and reclassify your first loan as investment debt.

In practice, banks will usually: 1) count only 70–80% of your Zetland rent, 2) load both loans with at least a 3% APRA buffer above the actual rate, and 3) apply stricter LVR caps and valuations to dense postcodes like Green Square and Zetland.

Modern Zetland apartment living room with city view and finance overlay. Keeping your Zetland unit as an investment hinges on how lenders see the rent, equity and risk.

Step 1: How lenders treat your current Zetland unit

Your home loan becomes an investment loan

The minute you move out and keep the unit, most lenders will:

Recode the loan as investment (often with a higher rate).
Treat the repayments as an ongoing commitment when assessing the new home loan.
Expect you to switch to P&I if you’re on interest‑only and your term is expiring.

If your current loan is $650,000 at 5.9% P&I over 30 years, real repayments are about $3,850 per month.

For servicing, most banks test this at ~8.9% (5.9% + 3% buffer), which is closer to $5,250 per month on their calculator.

Rental income gets “shaded”

Australian lenders typically shade rental income from investment properties to around 70–80% when testing borrowing power (claims 10 and 13).

Say you expect $850 per week rent on a one‑bed Zetland unit:

Annual rent: $850 × 52 = $44,200.
Bank uses 75%: $33,150 as assessable income.

That $11,000+ gap is the bank’s allowance for vacancy, costs and risk.

High‑density postcode rules

In Zetland/Green Square, many lenders add extra rules (claim 12 and [/insights/green-square-property-types-lending-rules]):

Lower maximum LVR (e.g. 70–80% instead of 90–95%).
More conservative valuations versus the price you think the unit is worth.
Tighter policies for small units, mixed‑use buildings or lots of investor stock.

If your unit values at $750,000 but the lender is comfortable only to 80% LVR, your usable equity might be capped at around $50,000–$70,000 once they consider existing debt and buffers.

Step 2: What this does to your upgrade budget

Quick worked example Assume: - Zetland unit loan (now investment): $650,000. - New home you want: $1.4m inner‑ring house. - Deposit and costs: 20% + stamps ≈ $330,000–$350,000. - Your combined income: $260,000 salary. - Expected Zetland rent: $850/week. On a typical calculator, once the bank: - Shades rent to ~75%. - Tests both loans at ~8.5–9%. - Applies realistic living expenses (HEM) and any other debts. You’ll often find your borrowing power is 10–25% lower than you assumed. If you haven’t yet, read [/insights/upgrading-apartment-green-square-zetland-guide] for how this sits…

Premium insight

The strategy continues below

You've seen the problem and the groundwork — now unlock the exact steps our CPA-certified brokers use, including 4 more sections. Enter your email for instant, free full access.

Free access. No spam — unsubscribe anytime. Your details stay confidential.

Frequently asked questions

Most lenders will consider expected rent for servicing if you provide a written rental appraisal from a local property manager. They usually shade this figure to around 70–80% to allow for vacancy and costs. Once you have a signed lease and some payment history, reassessments and refinances can use the actual rent, again shaded for risk.

You should notify your lender when your former home becomes an investment property. Lenders typically reclassify the loan to investment, which may mean a higher rate and, over time, a requirement to be on principal and interest. Not updating them can breach your contract and cause complications if you later need assistance or want to restructure.

Aim to keep your combined portfolio at or below about 80% LVR to avoid lender’s mortgage insurance and preserve flexibility. Beyond that, holding three to six months of total property expenses in cash or an offset account is a sensible buffer against vacancies, rate rises or valuation shocks. This reduces the risk of being forced to sell in a downturn.

Talk to a CPA-certified broker

Free consultation, plain-English advice tailored to your situation.

All insights