Rentvesting in 2026: 4 Principles for Smarter Portfolios

If you're going to live in Broken Hill and actually live there and that's your forever home, that's a problem for a rent investor. Performance doesn't just mean asset performance, performance can mean career and business performance. If I was locked down in a house and I didn't take that opportunity, I wouldn't be sitting here today. Rent investing was a game changer for me. The places where you want to live usually aren't the most affordable.

You can't have a life that you are trying to run away from, skills that you don't want to attain, and property is your vehicle. So the bigger that difference, the more it makes sense and the more your cash flow is usually better if you are renting. So rent investing, if you can look at it from a performance builder and lifestyle, not just lifestyle only, you will be a better property investor. I've got a downside of renting. What's up?

On the Property Nerds podcast, the numbers don't lie. It's what we live by. And right now, the numbers are clear that rent investing is one of the biggest and most important strategies of 2025. Going into 2026, at the end of this episode, you're going to actually hear from us on our forecast for what will happen with rent investing for 2026. Now, in this episode, we're going to cover off the four core principles of rent investing, the things that people consider on deciding whether they're going to do it or not.

And you can actually hear real case studies of examples when people do it, what's unlocked for their borrowing position, what's unlocked for their actual portfolio growth, just so you can consider whether it's right for you. Now, each person on this journey will have that key part, what's right for them. So take this information and insight just to understand the four core principles and then make your decision on what you feel is best. Nerd alert! Property Nerds, the home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends.

Welcome to the Property Nerds podcast. I'm Arjun Paliwal, one of the co-hosts, and I'm joined by Jack from 4Acre Financial, Adrian, fellow co-host from the InvestorKit team, our lead portfolio strategist. Welcome, gents. What's going on? Mate, we're talking rent investing.

I mean, let's talk firstly what rent investing is. Adrian, I'll come over to you, mate. We've all been rent investors, right? True. I'm not now anymore.

I'm now not a rent investor, but I mean, there's reasons behind that, which we'll cover off. But Adrian, what is rent investing? Rent investing, it's kind of what the name implies, is when you're renting and rather than purchasing your home, you're investing in other assets. And actually, is it specific to property? I mean, it doesn't have to be property.

It could be anything. But I mean, vesting just is investing, right? But, you know, the most biased people in the world, us three, property is the topic of today. Of course, mate, of course. But rent investing, spot on.

Rent where you want to live and invest in your future rather than being so attached to like what I live and what I buy is everything. Why is it surging or has it been surging in 2025? And how has this strategy changed over the last decade, in your opinion, Adrian? There's probably two parts to it. I think there's the first part, which is the mental part, which is, you know, back in the day, no one questioned it.

It was always buy your home and then you do, you know, you pay off your home and then you go do the other things. That's, you know, the traditional mindset, as some people may call it. So I think there's been a bit of a mindset shift of, hey, actually, we don't have to do this. We can rent vest, you know, like you said, rent where you want to live, invest where it makes sense. So the mindset shift, I think, has just come about as one big change because it's become a lot more normalized.

The second part of it is, of course, the fact that places are a little bit more expensive. The places where you want to live usually aren't the most affordable. If you're talking places like in Melbourne, maybe you want to live in a city in Collingwood, let's say Sydney, we talk about Bondi, you know, all of these places that a lot of younger people want to live, which are very expensive to own, just makes a lot more sense for you to just live there, enjoy your life. Also keep in mind that maybe you're probably going to be moving in a couple of years as well. You might not be attached there forever and then investing in other things that usually or hopefully will get you a better return as well.

Absolutely. Now, Jack, when it comes to, you know, rent vesting, the first principle we want to talk about is financial logic and strategy. So when it comes to regions where from a borrowing capacity, rent vesting makes sense. And I don't mean like a specific area if you don't have one come to mind right now, but the main thing I want to ask is like, what type of areas does it make sense to rent in? And then what types of areas when you consider the borrowing capacity calculations does it make sense to invest in?

Yeah. So like if you've got a, you live in Sydney and you've got a borrowing power of 600, 700 and you can only buy a unit versus going and just buying a house in another major city or other parts of Australia, like it's just a no brainer. I think for a lot of people, you know, affordability is definitely a consideration, but also your family dynamic. I think when you're single, it's much easier just to rent and not have to worry about buying a house or like, what do you need a house for at that age when you're single anyway? In the last five years, I think I've moved four times and it was all over the shop because I had different employment, you know, different places that I worked.

I was moving around just so it was convenient. You can't do that if you set yourself up in a house or a unit and you're stuck. You're using about six to 10% in transactional costs to go in and out every time. And if you're talking a $600,000 property, that's like proper dollars, like 40 to $60,000 of cash every single time just to move around each time. Or you're traveling a stupid amount of time to get to work and you're restricted.

You might even turn down certain opportunities because it's too far away. You're not flexible enough to take on an opportunity and move to bloody Homebush where I started in Campbelltown. If I was locked down in a house and I didn't take that opportunity, I wouldn't be sitting here today. So flexibility, but also just like it doesn't make logical sense to buy a one-bedroom unit to live in versus buying a four-bedroom house in another market. So that answers it from like a type of market scenario where you're sitting in Sydney, you've got a 600K budget, but then you're looking at it and you're going, well, don't buy that unit to live in.

Do look at investments where it could make sense. What about the numbers? Like Adrian, when we're thinking of the numbers that rent investors should be running, there's yield, there's borrowing power, there's cash flow, there's long-term growth. What are some of the considerations for the numbers of rent investing that people should have in mind? I think cash flow is the biggest one.

When you think about, I know, Jackie, you used the example of 700K borrowing capacity, but let's say we beef that a little bit up and someone's got one and a half mil. If they were to purchase a home and realistically in Sydney, that's kind of where the price points sit at. That's where the loan is. All of your cash flow is going there compared to when you are renting. Usually what you're typically comparing is what interest rate versus rental yield because that's what you're actually going to pay in rent.

So the bigger that difference, the more it makes sense and the more your cash flow is usually better if you are renting in an area. Absolutely. What does that mean? Usually correlates to higher price point areas where it does make sense to rent this because that cash flow difference is so significant. Well, I looked at the numbers recently.

Property in Mosman, median price is over $6 million and the rental yields are like an amazing 1. 7%. You now kill the P part, P and I, principal and interest, kill the P part because everyone goes, oh, but Arjun, you're paying your home loan down. It's your property. Okay, we'll just take the principal part out.

Let's just compare interest bills and interest bill at 5% to 6%, 4. 5% to 6% if the rates come down even versus a rental yield of 1. 7% and that's before rates, insurance, property management, anything like that. So the key is really in the choosing the location you live in. If you're going to live in Broken Hill and actually live there and that's your forever home, that's a problem for a rent investor because you're paying a yield that's higher than the interest rate, right?

But if you're going to just live in Broken Hill seasonally for a certain time and you plan to move out, then of course it makes sense to rent there and then know that you're not going to be living there forever. So it's these dynamics of like that movement of where you go, but those numbers that you guys are both talking about is really important. You don't want to buy that 600K and buy a really inferior property. And secondly, you don't want to look at a really low yielding area and buy that property because even if That's the building we're working in. Hell yeah.

This is around the time we had our first kid. And it was just like so convenient just to jump up and down, you know, anytime. It was just, yeah, love it. My message there is that if you want to be a high performer in property investing, you've got to be a high performer in life. Like your life just doesn't, you can't have a life that you are trying to run away from, skills that you don't want to attain, and property is your vehicle.

Unfortunately, property is not one of those things where you just have money lying around and you buy it. It takes debt. And to get more hands on more debt, you need to have higher incomes. And to handle more debt that doesn't pay you instantly because property is delayed gratification, you also need to be able to save more. So rent vesting, if you can look at it from a performance builder and lifestyle, not just lifestyle only, you will be a better property investor.

Enjoying the show? At 4acre Financial, we believe property is a game of finance and we're here to help you win it. Whether you're still building a portfolio or looking to formulate your exit strategy, our tailored mortgage strategies are designed to simplify your journey and supercharge your confidence. Are you ready to take the next step? Visit 4acrefinancial.

com. au and book a free strategy session with us today. Let's make property investing less stressful and a whole lot more rewarding. We've got to get the other side of the coin, risk management. Risk is everywhere, whether you're rent vesting or whether you're buying a home.

What are the most common mistakes you see, Adrian, from new rent vesters? And how could they manage that risk better when it comes to mistakes you see rent vesters make? I'm trying to think of any mistakes of rent vesting, I'm not going to lie. I know you said you're trying to make the argument for the other side, but I mean, I've got another one to further support rent vesting. Let's do it, mate.

You look at a couple of years, a few years ago now, when we were getting loans at 2%, right? Imagine being an owner occupier, maxing out your capacity at 2%, and over the next 12 months, you get 12 rate increases. Bang, bang, bang, bang, bang. And I don't think I've ever seen, you know, from what mortgage repayments did during that time, I've never seen rents go up that quick. Look, rents did go up, but in all fairness, like you said before, you can change.

Yeah, but not that quick, man. The speed of how quick the rates went up when they did, I don't think rents, you know, you sign a 12-month lease, it's fixed. If they come back and say... That's the thing there, that's the big X factor. Because rents did boom during that time, but what you're saying is spot on, which is it's a 12-month fixed term at a time, it has to catch up.

If your landlord's going to up your rent by 400 bucks a week, well, okay. And that's what happened. They left. They didn't have to pay it. They moved out of the area and...

No stamp duty, repurchase, no CGT, no sales agent cost, no buyer's agent to rebuy, no conveyance on the way in. We've got to find something. No conveyance on the way out. We've got to play devil's advocate. Okay, here we go.

I'll help with the devil's advocate. I'll help with the devil's advocate. As a rent investor, this is where you make the mistakes. Number one is you actually don't look at investing the right way. You have the concept of rent vesting, so you rent where you want to live, and then you actually invest in your future, but you just get the investing part wrong.

Like the amount of people who go, this is a smart move, I'm going to do it, but then they forget. You do know that if you do it for performance, you have to perform, right? So like attacking it on your own and making the same mistakes, you don't get borderless, you're buying units instead of houses, you buy off the plan stuff and hope that it fingers crossed that it works for you, you buy properties without having the data, you don't build a team around yourself, you don't do due diligence, you don't have a portfolio plan to see how rent vesting will get you to your actual goal. So there you go. You can be a rent investor.

You can still stuff up. I've got a downside of renting. What's up? You've got to remember to clean the range hood in the oven. Those routine inspections, mate.

Range hood in the oven. Don't forget. They'll take you for it. Oh, yeah. I mean, you know, with the other part is though, is the other mistake on rent vesting I see is that yes, you can go and rent where you want to live, but it's important to realize that if where you want to live is one of the most popular places on this earth, you're going to get out to the eastern suburbs and you've got to be prepared to see a queue of 100 people at that rental.

So what are you going to do? Like you've got to just have some component. Reality can't be lost in any side of the coin. If you're a home buyer or you're a renter, reality needs to exist on both sides, which is, okay, sure. Yes, it makes sense to rent vest and go to Bondi, but just know a lot of people want to do that too.

So if they do, you've got to be either ready for the queues. You've got to be prepared just like a home buyer, prepared in your application. I'm not telling you should do this, but yeah, pay what you think it's worth. But look, the price is there for a reason. Follow the rules.

The third thing is don't have your hearts out on one place and think you're just going to get it. Apply across multiple. And in your preparation for applications as well, like you can't just be like loose as and get stuff across and feel like people owe you something. Like it's a battle for something in certain places. Like you have to go hard.

So I think that's probably my other side when it comes to risk management. The common mistakes I see are the same common mistakes investors make, but they just make it in rent vesting and think that, oh, rent vesting didn't work for me. If I'd bought a home to live in in so-and-so area, I would have got to here and I shouldn't have invested there. That investment didn't work out. Well, rent vesting, you still need to be a good investor.

There's that other side, which maybe we haven't considered on the numbers side, is when does it not make sense, right? Which is when we talked about the cash flow and we talked about the potential growth. Those are the things to consider when you're rent vesting. If you're considering purchasing your home or investing somewhere else, it's kind of like you said, you have to make sure that where you're investing performs better than what you could potentially live in as well, if you are thinking about that. Absolutely.

And then the cash flow side of things of, yeah, if yields are really high in your area, might not make sense from that cash flow side as well. So those are the two things. And if we go back or wind back the clock, what, a couple of years of maybe people who were in 2021 and considering it in Adelaide, it might have made a decent amount of sense to purchase your home then as well. Absolutely. So that's another part is that if you're in a, that's actually a really good point.

If you're in a good cycle to buy in and that city is popping off, buying to live in can actually make a lot of sense if you can afford it, right? Because now you've got potential first home buyer waiver, CGT waiver, you've got good owner-occupier interest rates, you've got high loan to value ratio, you've got rising market, and then if you ever do sell it, you've got all of that going for you. I was just about to say that. I was just about to say that. You've got exposure to a capital gains exempt asset.

Yeah, 25% higher because I mean, typically if you have a million dollar gain, that's always going to be top tax bracket. Even if you half it with 50% CGT, that's now 500K. 500K is a top tax bracket. Say goodbye to half of it. So that's 25% of the total million dollar gain.

So you're saving 25% of any gain if you get that CGT waiver, right? Obviously in personal names and speak to your accountant. Get the right advice. Get the right advice. Speak to your accountant.

Now, before we go to the fourth and final principle, which is the market outlook for 2026, what people are thinking of when it comes to rent vesting, I want to share something. Many of the people who've been following going, Arjun, well, you're not rent vesting anymore. Why not? Well, firstly, if you measure it on a financial decision, it's not a smart decision what I'm doing. The mortgage is fat.

But how many properties did it take for you to get to the owner? Oh, absolutely. It took a lot, right? But I mean, if I go through some of the reasons where you're on the fence and going, well, when do I not rent vest? Like, when can I buy in?

We covered off one reason then, which was the whole rising market in your own city and you're capturing it and it makes all those moves right.