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Will a bank recognise earned income under this model?

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Banks take into account market rent which is based on similar properties in the area. This means that a bank will only recognise the amount of rent you could earn as a standard family home – not a shared home with multiple tenancies. This is nothing to be worried about as it is a common practice among Australian Financial Institutions. I.e. Even an Airbnb that earns double that of a market rent, a bank will only take into consideration the market rent rate.