Jargon or common terms used by Property Investors

 

  • Application Fee – A fee paid by the borrower to the lending institution for obtaining finance.
  • Bridging Finance – A short term loan/facility that is often used when buying a new dwelling previous to settling an existing dwelling.
  • Body Corporate – The term ‘Body Corporate’ refers to a home owners association charged with the administration of one or more housing units. Owners of the individual dwellings pay a fee to provide for maintenance of common areas and provide cover for repairs that may arise in the future. Often includes an onsite manger.
  • Capital Growth – The change in value of an investment. This is calculated by subtracting the purchase price from the current value of the investment and is usually expressed as a percentage. If the price of the capital asset has declined instead, this is called a capital loss.
  • Comparison Rate – A rate used to compare the borrowing costs from competing lenders. The basis of comparison includes the interest rate and the majority of fees and charges payable during the life of the loan. The figure is expressed in percentage terms. It should be noted that some costs including redraw fees or early repayment fees, and cost savings such as fee waivers, are not included.
  • Deposit Guarantee – A substitute for a cash deposit used to purchase a property. At the time of settlement.
  • Equity – The net value of the asset. This is calculated as the value of the property less any outstanding loans secured by the property.
  • Gross – The complete amount before deductions for taxation, inflation, or any other various fees that may be incurred. The term ‘gross return’ refers to the amount of capital growth and yield before taxation, body corporate, fees, inflation and other expenses are taken into account.
  • House and Land Package- buying a packaged deal from a builder or developer, where the buyer settles on the land first and then the house gets constructed
  • Infrastructure – Basic facilities required for a community or society to function as an economy, including transportation, communication, provision of water and power and the public institutions needed for security, welfare, health and education.
  • Interest in Advance – When interest is charged at the beginning of a period of time. For example, charging the first years interest in the first month of a loan. It is generally only available on fixed rate loans for investment purposes.
  • Interest Only – Loan A loan facility commonly used for investment loans where the borrower only pays the interest component of the loan for a specific period of time.
  • Off the plan- buying a property before it has been constructed and sometimes even before the land has been registered
  • P & I- Loan where the borrower pays principle and interest.
  • Price $/m2 – A measure for determining the relative value of a given property based on the internal size. This is calculated by dividing the purchase price by the internal area (measured in m2) and expressed as dollars per m2.
  • Real Return – The return on investment, less the reduction in its value as a result of inflation. Real rates are important as they tell you what the actual increase in value is, and how much of a return was less the effect of inflation.
  • Rental Guarantee – A guarantee by developers to pay an agreed level of rent should a shortfall achievable in the market arise. This is usually based on a percentage of the purchase price.
  • ROI- return on investment. For example: $ 500,000 unit returns 7% (=ROI or yield)
  • SMSF Property- property to bought in a single contract for a self managed super fund- get advice from your account first before buying the property
  • Turn Key Inclusions- the builder includes finishing items like window coverings, security screens, dishwasher, ceiling fans, air-condition, letter box, clothes line etc. However, the complete inclusion list will vary from builder to builder
  • Valuation – The estimated worth of a project based on comparable sales with projects of a similar type. This is conducted by a registered valuer.
  • Yield – an annualized rate of return for a given investment. This is calculated as the annual achievable rent expressed as a percentage of the purchase price (or current market value) of paid investment.