If you're a property investor or have been interested in buying an investment property, you'd know that there's plenty of terminology to wrap your head around. Whether real estate investing comes naturally, or it doesn't - that's alright! Just like with any topic in life, you can't be expected to know absolutely everything.
In this article, the team at Real Estate Investment Finance will share a basic property investment glossary. This will help you to get ahead and level up as a property investor.
Appreciation:
overtime certain assets increase in value. This can be applied to real estate or your rental properties
Body corporate:
when someone invests in a single unit or apartment of a strata building, they may be required to pay a fee which makes up the administration and upkeep of the entire complex
Capital gain:
a term used to explain the gain investors incur when they sell a rental property, in comparison to the price they originally purchased it for
Cash flow positive:
when cash incomings are more than the value of outgoings once tax-deductible items on an investment property have been claimed
Depreciation:
opposite to appreciation, this term is used to explain the decrease in value of an investment property or its fixtures and fittings over time. It can be claimed as a tax-deductible expense from the Australian Taxation Office (ATO) at the end of a financial year
Dwelling:
a place where someone resides in. Examples include; single-detached dwellings (for instance a single home) or a dual dwelling (a dual occupacy home)
Equity:
when buying an investment property, equity is the difference between the current value of a property and how much is owing against the property's mortgage
Lenders Mortgage Insurance (LMI):
lenders mortgage insurance/ or LMI is when someone takes out home loan to buy a house, this is a fee they pay their lender when they're borrowing more than 80% for the loan. It protects the lender in case the borrower defaults
Loan to Value Ratio (LVR):
a measurement used by financial institutions to determine if a borrower afford to take out a home loan. It's determined by calculating the total loan amount by the value of the property and multiplying it by 100
Negative gearing:
when a real estate investor receives less in incomings than they do in their outgoing expenses, even after tax deductions have been claimed. It's the opposite strategy to the cash flow positive strategy explained above
Off-the plan:
this is when a property investor purchases a property that hasn't yet been built
Property portfolio:
a term used to explain the total number of investment properties an investor may own
Property manager:
a person or company that's responsible for overseeing the day-to-day management of an investment property on the owners behalf. They act as the agent between the property owner and the tenant
Rental yield:
used to determine the ROI based on the amount the property was originally purchased for. It can be calculated by multiplying the weekly rent from an investment property by 52 (weeks in a year) and dividing that number by the amount the property was purchased for. That number is then multiplied by 100 to determine the gross rental yield
Stamp duty:
a tax imposed by the Government based on transferring the title of the land for the property on to the buyer
Subdivision:
when a block of land is divided into smaller, individual blocks of land
Vacancy rate:
a measurement used to determine the quantity of rental properties that are available for rental occupancy in a certain location during a period of time
Vendor:
the legal definition of the person or entity selling a property
Other real estate investing questions?
Are you buying an investment property and wish to learn more? Please feel free to reach out to our team on the contact details listed below.
Alternatively, click the button shown below to book an appointment with an REIF Investment Specialist to support you in creating wealth for your financial future.
Ph: 1300 130 932
Email: clientservices@reif.com.au
We explore this topic in our eBook 'Building Wealth Through Property.' Check it out here for FREE!
