Glossary of Australian Property Investment Terms

Navigating the vast ocean of property investment and finance jargon can leave you feeling like you’re up a creek without a paddle – even for the most financially aware borrowers.

Lenders and brokers often try to dumb down their financial buzzwords, but in many instances, confusing financial terms are unavoidable.

To help you pick your way through mortgage and finance jargon we’ve compiled a glossary of terms that you may encounter along your path to investment property ownership.

So if you become confused along your journey, refer to any of the terms and phrases below.

Jump straight to

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Absentee Owner

An individual or corporation that owns a particular property without actually occupying it or actively managing it.

Abstract of Title

The summarized history of all the titles, transfers and legal actions that are connected to a property.

Appraiser

An individual who has the knowledge and expertise necessary to estimate the value of a property.

B

Bad Title

A legal document of property ownership that does not grant ownership to its holder due to unsatisfied legal or financial problems.

Balloon Loan

A type of lending arrangement that doesn’t fully amortize (payout in full) over the life of the loan so that a lump sum balance remains at the end of the loan period that must still be paid.

Bank-owned Property

Properties that are taken into a bank’s inventory. Property that is acquired by a financial institution when a homeowner is unable to make mortgage payments.

Best and Final Offer

In bidding or negotiations, a prospective buyer’s last and highest offer to purchase a property.

Broadhectare Land

Sometimes also called Greenfield Land; it is undeveloped land that has been identified for residential development.

C

Cadastre

The public register of land boundaries that defines separate holdings of land.

Capital Improvement

An addition of a permanent structural change or the restoration of some aspect of a property to increase the property’s overall value.

Catchment

The geographic region serviced by a particular centralised service or function, such as Emergency Services.

CBD

The acronym for Central Business District – it is the main business and commercial area of a town or city.

Certificate of Title

A document that identifies the legal owner (or owners) of a property.

Commercial Real Estate

Property that is used exclusively for business purposes ad may not be used as residential or living space.

Crown Land

Sometimes also called State Land; it is the land that is owned and managed by government for the benefit of the community.

D

Debt Consolidation

The process of arranging a new loan for the purpose of combining multiple debts into a single larger debt to be paid off.

Delinquent

Something or someone that fails to accomplish what is required by law, such as the failure to make a required payment against a loan in a timely manner.

Demography

The scientific and statistical study of populations; in particular their size, development and structure.

Distressed Sale

When a property is sold urgently due to the owner being affected by unfavourable circumstances.

Dwelling

A structure or building in which people live.

E

Earning Assets

Income-producing investments that have a base value and the ability to produce additional funds beyond this inherent value.

Encroachment

Violation of a neighbouring property owners rights by building on or extending a structure on to their land or property.

Escrow Agent

An individual or organisation that holds property in trust while a transaction is finalised or a dispute is resolved.

Eviction

The process by which a landlord may legally remove a tenant from their rental property.

F

Fair Market Value

The most probable price a property would sell for on the open market in an arm’s-length transaction between two willing parties.

Flipping

The purchasing of an asset (such as real estate) with the intent of selling it for a quick profit rather than holding on for long-term appreciation.

Foreclosure

The legal action of taking possession of a mortgaged property by the financial institution when the mortgagor (borrower) fails to keep up their mortgage payments.

Fractional Ownership

A purchasing arrangement method in which several unrelated parties can share in and mitigate the risk of ownership of a high-value tangible asset.

G

Gentrification

The process of renovating and improving a city urban environment to transform it from being a poor area into a more affluent locale.

Grace Period

An agreed period nominated within a contract that allows payment to be received at any time within a certain period of time after the actual due date.

Gross Earnings

Sometimes called Gross Income; is the total income earned by an individual before tax, deductions and accounting adjustments.

H

Holdover Tenant

A renter who remains in a property after the lease has expired.

Home Equity

The portion of a home’s current value that the owner actually possesses free and clear, without obligation to a lending institution or lien.

Housing Affordability

A calculation that determines whether property prices are in a range that low to moderate income households can afford to pay and still be able to meet other basic living costs.

I

Infill Development

New residential development that occurs on small sites in established suburbs and produces less than ten new dwellings.

Income Splitting

A tax minimisation strategy used to fictionally allocate earned income of one spouse to another with the aim of reducing tax rates on assessable income.

Inflationary Risk

Sometimes called Purchasing Power Risk; it is the uncertainty over the future real value of an investment due to changes that reduce the investment’s worth.

Investment Real Estate

Property that generates income or is otherwise intended for investment purposes rather than as a primary residence.

J

Joint Tenancy

A legal arrangement in which two or more people own a property together, sharing equal rights and obligations.

Jurisdiction Risk

It is the uncertainty over a bank or financial institution’s exposure due to their participation in high-risk areas or regions (for example, money laundering or terrorism).

K

K-Ratio

A metric to evaluate the appreciation of wealth and the consistency of that wealth creation.

Kickback

A payment to a recipient as compensation or as a reward for providing favourable treatment or services.

L

Land Value

The financial value (worth) of a property including all improvements or upgrades and excluding any buildings.

Leasehold Improvement

A change made ot a rental property to customise it for the specific needs of a tenant.

Lenders Mortgage Insurance

An insurance policy that protects a lender or title holder against losses that may be caused by default (failure to pay) of a mortgage loan by a borrower.

Lien

A lenders claim against a property belonging to another person, that prevents the sale of that property until a debt owed is paid.

M

Marginal Land

Land that has undesirable characteristics with little or no potential for profit, appreciation or value improvement.

Mediation

An alternative dispute resolution method that allows parties to negotiate a settlement without going to trial.

Medium Density Housing

More than one dwelling on an ordinary house block, including any form of attached housing such as townhouses or apartments.

Month-to-Month Tenancy

A periodic tenancy in which the tenant rents from the property owner one month at a time.

Mortality Rate

A number that reports how often deaths occur in a particular population.

Mortgage Accelerator

A type of loan account setup where the borrowers’ income is directly deposited into the mortgage account to pay down the mortgage faster.

Mortgagee

An entity (such as a bank or financial institution) that lends money to a borrower to buy property.

N

Negative Equity

A situation that occurs when the value of a property falls below the outstanding balance of the mortgage for that property.

Negative Gearing

A form of financial benefit that is created when investing borrrowed money in an asset that is unable to produce enough income to cover loan payments; resulting in a loss that can be claimed as a tax deduction.

Net Worth

A metric that financially defines what an entity (asset, business, individual) is worth.

Non-Negotiable

To take the position of being closed off to discussion or modification; the thing is firmly established and cannot be adjusted.

O

Offset Mortgage

A type of lending arrangement offered by financial institutions where the borrower maintains a savings account with the lender and interest earned on the savings contribute towards loan repayments.

Open House

A scheduled time when a property is arranged to be available for viewing by potential buyers.

Owner Occupied

A property that is used as a dwelling by the property owner.

P

Party Wall

A shared wall that separates two adjoining separately rented or owned properties.

Principal Residence

Your main residence (your home) and the property where you and your family live, your belongings are held, your mail is delivered and your known electoral roll address.

Private Sale

When a property is advertised for sale and the sale price is negotiated between the seller and prospective buyer.

Property Manager

An individual or organisation retained to oversee the day-to-day operations of a unit of real estate for a fee.

Q

Qualified Appraiser

An individual with professional accreditation and experience in valuing assets (including property).

Quorum

The minimum number of individuals with vested interest that must be present to make the proceedings of a meeting valid.

R

Rain Check

A promise or commitment from a seller to a buyer that an item currently unavailable can be purchased at a later date for the current day’s sale price.

Real Estate Investment Group

An organisation that builds or buys properties and then sells them to investors as rental properties.

Reclamation

The right to reclaim property in the event of non-payment, fraud or other irregularities.

Recurring Debt

Any payment for monies owed that occurs on a continuing basis and cannot be easily cancelled, such as loan payments.

Rent Roll

A register of a landlord’s property with the rents, names of tenants and amounts due; it documents the total income and is considered a trade-able asset.

Reserve Fund

A bank account in which to set aside money for anticipated expenditures and other future financial costs for maintaining a property.

Risk Participation

A transaction where banks in financial difficulties are able to sell their risky ventures to other financial institutions.

S

Sealed Bid Auction

A type of auction process in which all bidders simultaneously submit secret bids to the auctioneer, so that no bidder knows how much the other participants have bid.

Security Deposit

A sum of money given to another party intended as proof of intention in a transaction.

Squatter

A person who settles in or occupies a property with no legal claim (no title, right or lease) to the property.

Sublease

Renting part or all of a property by a tenant to a third party.

Surveying

The examining and recording of area and features of a particular piece of land so that a map, plan or detailed description of it can be captured.

T

Tax Deduction

A type of transaction that reduces a person’s tax liability by lowering their calculated taxable income.

Tax Exempt

A transaction or income that is free from taxation and therefore excluded from calculation on tax obligations.

Tenement

Any sort of multi-occupancy rental property.

Title Search

A search of public records to determine or confirm a property’s legal owner and discover what claims exist for a property.

True Lease

A type of multi-year lease in which the lessor gives the lessee exclusive rights to use and possess property for a monthly fee over a specified period.

U

Underwater Mortgage

A situation that occurs when the balance of a mortgage loan is higher than the fair market value of the property.

Unit Trust

A financial structure that enables a form of collective investment; pooling investor money and assets into a single fund.

Unsecured Loan

A loan that is issued and supported only by the borrower’s creditworthiness or credit score, rather than by any type of asset.

V

Vacancy Rate

A calculated statistic for reporting on the percentage of all available property that is vacant or unoccupied for a specific period of time.

Voluntary Foreclosure

A foreclosure initiated by a borrower unable to continue making loan payments on a property.

W

Waiver

The voluntary withdrawal of your own contractual rights in an agreement.

Wear and Tear

Damage that naturally and inevitably occurs as a result of use and ageing

Y

Yield

The cashflow earnings generated by an investment over a particular period of time.

Z

Zombie Debt

A long forgotten about debt that is usually written off as uncollectible.

Zoning

The council or local government laws that specifies how privately-owned urban property can or cannot be used in certain areas