Are you wanting to become a property investor, but are struggling with all the data and property language that’s being thrown at you? We have put together this beginner’s guide, to help you understand all the terminology and information that comes with property investing.
Auction – A public property sale, where buyers gather together at a specific time and place to bid on the property. The highest bidder is usually the successful buyer.
Capital Gain – This is the total difference between the purchase price and selling price. It is primarily used for calculating income tax.
Capital Growth – This is the increase in the property’s value over a defined period of time.
Comparison Rate – This is an indicative interest rate. It is used to help identify the potential total cost associated with securing a loan. It is comprised of the total loan amount, term, repayment frequency, interest rate and the fees and charges that occur with the loan.
Conveyancing – The transferring of a real estate’s legal ownership is what is known as conveyancing.
Rental Yield – A calculated amount used to determine how much cash the property will generate per year.
Gross Yield – The calculated rent total prior to expenses being deducted.
Net Yield – The calculated rent total after expenses.
These yields are what is used to compare properties in order to determine which is of greater value long term.
Investment Return – A property’s total combined capital growth and net income over a period of time is its return on investment.
Median Price – Within a range of property values ranked from lowest to highest, the mid-point value is what is called the median price.
Private Sale/Treaty – This is one of the most common ways to sell a property. A private sale has no specified closing date for offers, which means the owners can negotiate with buyers for as long as they wish until they are happy with a buyer’s offer.
R-Codes – This is code for a residential housing density. It describes the average type of property within an area, and determines what type of construction can take place on a dwelling or block of land in that area. It is a code commonly used by developers and local councils.
Settlement – When a property sale price has been agreed upon between buyer and seller and the balance of the purchase price is paid to the seller, is what is called a settlement. When a settlement occurs, the buyer will receive the keys to the property and become its official and legal owner.
Tender – This is what the sales process is referred to. When an interested buyer submits an offer, bid or proposal, it is called a tender. The owner will then consider the offers and either accept, decline or enter into negotiations.
Title – The ownership of a property or a document proving evidence of ownership is called a title.
Transfer Duty – This was previously what was known as ‘stamp duty’. It is a Government State Tax that is paid prior to the settlement. The amount is determined by the property’s purchase price. Every Australian state has different rules and alternate ways to calculate this transfer duty.
Vacancy Rate – The total number of unoccupied rental properties within a market is called the vacancy rate. The higher the vacancy rate the better for tenants, as there is more choice. A lower vacancy rate usually increases the rental prices.