Borrowing Power for Property Investors: Rent, Costs and Negative Gearing in 2026

The short answer

If you own or are buying an investment property, three things shape your borrowing power: how much of your rent a lender counts, what it assumes the property costs to run, and whether it still recognises negative gearing.

That last one changed significantly in 2026. If you’re planning a substantial investment purchase, it could make a difference of hundreds of thousands of dollars.

Last reviewed: November 2026. Lender policies are still evolving, so check with us before acting.

Rental income

Common view: “Lenders only count 75–80% of your rent.”

That’s true for many banks, and that figure already includes an allowance for your property running costs, typically around 10%, so no separate property expenses are deducted. But it’s not the whole story:

• 85–95%: some lenders count a higher share of your rent, but then deduct your property expenses separately.
• 100%: a small number of lenders accept the full rent, typically with conditions such as a positively geared property or a strong overall position. Property expenses are still deducted separately.
• Evidence: lenders usually want a lease, rental statements, or a rental appraisal for a property you’re buying.
• Short-stay rentals: Airbnb-style income is only accepted by limited lenders, usually with 12 months of history.

Investment property expenses

If your lender counts a higher share of your rent, it deducts your property costs separately. These include council rates, insurance, strata, property management and repairs.

• The usual rule: most of these lenders assume your property costs are at least 10% of the rent, even if your actual costs are lower.
• No minimum: some lenders have no floor and use the expenses you actually declare, as long as they’re realistic for the property.

Example: Your property rents for $600 a week ($31,200 a year). You self-manage, and your real costs are $2,500 a year. Here’s how much net rental income each approach counts:

Lender approach	Net rent counted
80% of rent, costs already included	$24,960
95% of rent, less the 10% floor ($3,120)	$26,520
100% of rent, less your declared costs ($2,500)	$28,700

That’s a difference of almost $4,000 a year in assessable income from the same property.

Negative gearing: how it used to boost borrowing power

A property is negatively geared when its costs, including loan interest, are higher than the rent it earns. That loss can reduce your taxable income, which means you pay less tax.

Many lenders added that tax saving back into your income when working out what you could borrow. For investors with large loans and higher incomes, this add-back could be worth a lot of borrowing power.

What changed in 2026

The May 2026 federal budget limited negative gearing on some investment properties bought after 7:30pm AEST on 12 May 2026. The rules take effect from 1 July 2027, but lenders didn’t wait. The major banks and many other lenders have already updated their calculators.

Generally still counts	Generally no longer counts
Investment properties bought, or contracted, before 12 May 2026	Established properties contracted after 12 May 2026
Straight refinances of those properties
Cash-out refinances where funds go to an eligible purpose
A home owned before 12 May 2026 that you later rent out
Eligible new builds, whenever you buy them

Each lender applies these rules slightly differently, so how your situation is treated can vary.

How much it impacts your borrowing power

When the negative gearing add-back is removed, the impact can be significant:

• Everyday example: a borrower earning $100,000 might access about $750,000 for an investment loan with negative gearing counted, but only about $600,000 without it.
• Substantial purchase example: one lender recalculated a pre-approved investment loan without the add-back, using the same income and expenses. The maximum loan dropped from about $1.7 million to $1.27 million.
• Overall: borrowing power could fall by as much as 20% in some cases.

Why bigger purchases get hit harder: a larger loan means more interest, which means a bigger tax loss. Higher-income earners claim that loss at a higher tax rate. The bigger the purchase, the more borrowing power disappears when the add-back goes.

What it means for you

• Planning a purchase? Get a fresh assessment before you sign. A pre-approval issued before these changes may no longer be valid.
• Already own an investment? Its grandfathered status may be worth protecting. Speak to your broker and accountant before selling or restructuring.
• Match the lender to your portfolio: lenders that count more of your rent, or use your actual property costs, can help offset the change.
• Consider new builds: eligible new builds can still be counted, though they come with their own considerations.

Chess, not checkers

Property investing is a game of chess, not checkers. Every move, from how you fund your deposit to how you structure your loans, affects the next one.

We help you plan several moves ahead. With access to over 40 lenders, our team of lending specialists cuts through the jargon and complexity so you can focus on the most important part: living your life.

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General information only. This article does not consider your objectives, financial situation or needs and is not credit, financial or tax advice. Lender policies vary and change regularly. Examples are illustrative. Negative gearing information is current as at November 2026. Seek advice from a licensed credit adviser and your accountant before acting. Insight Property Finance.