Real estate investing

property jargon

As you explore the world of property investment, it's important to familiarise yourself with some of the key terms and concepts. We've put together this handy list as a quick reference to help you navigate the jargon with confidence.

  • A tax-deferred exchange under Section 1031 of the U.S. Internal Revenue Code that allows investors to sell a property and reinvest the proceeds in a similar property while deferring capital gains taxes.

  • The process of gradually paying off a loan through regular payments, which include both principal and interest. Amortization schedules can vary depending on the loan terms.

  • The increase in the value of a property over time, either due to market conditions or improvements made to the property.

  • The likelihood of a property's value increasing in the future based on market trends, location, and development plans.

  • An investment strategy where an investor purchases a property with the intention of holding onto it for an extended period to benefit from appreciation, rental income, or other long-term gains.

  • The net income generated by a property after deducting expenses, such as mortgage payments, property taxes, insurance, and maintenance costs.

  • The profit made when selling a property for a higher price than the initial purchase price.

  • A measure of the annual return on investment based on the actual cash invested in a property.

  • A type of property ownership where individuals own units within a larger building or complex and share common areas and amenities.

  • A financial metric that compares the amount of debt used to finance a property to the owner's equity. It helps assess the level of leverage in an investment.

  • Reduction in value of the property over a period of time. This can be due to wear and tear, becoming outdated, or other factors. Depreciation can have tax benefits for property investors.

  • Spreading investments across different types of properties or locations to mitigate risk and potentially increase returns.

  • The process of conducting thorough research and investigation on a property before before finalising a purchase or investment, including inspections, financial analysis, and reviewing legal documents.

  • The portion of a property's value that the owner actually owns, calculated by subtracting the outstanding mortgage balance from the property's market value.

  • The process of increasing one's ownership stake in a property over time by paying down the mortgage or through appreciation.

  • The practice of buying a property with the intention of selling it quickly for a profit, usually after making renovations or improvements.

  • A ratio that helps estimate the value of an investment property by dividing the property's purchase price by its gross rental income.

  • Home Owners Association fees charged to property owners in a condominium or planned community to cover maintenance costs, amenities, and shared expenses.

  • The property owner who rents out the property to tenants in exchange for rental income.

  • A legally binding contract between the landlord and tenant that outlines the terms and conditions of renting a property, including duration, rental amount, and other provisions.

  • The written document that formalises the lease terms and conditions between the landlord and tenant.

  • An agreement that allows a tenant to lease a property with the option to purchase it at a predetermined price within a specified timeframe.

  • The use of borrowed funds, such as a mortgage, to finance a property investment.

  • The ease with which an investment property can be bought or sold without significantly impacting its value.

  • The geographic area where a property is situated, which can greatly impact its value, desirability, and potential for growth.

  • When the expenses associated in owning a rental property exceeds the rental income generated from it. The concept of negative gearing can be applied to any asset class.

  • The evaluation of local real estate market conditions, including supply and demand, property values, rental rates, and economic factors.

  • The cyclical pattern of real estate markets, characterised by periods of expansion, peak, contraction, and trough.

  • Legal agreement between a lender and a borrower that is used to borrow money towards purchasing a property. Lender would take the property title as security until the loan is repaid.

  • A property that is not listed on the open market or Multiple Listing Service (MLS). Off-market deals are often found through networking or direct contact with property owners.

  • The administration and oversight of a property, including tenant screening, rent collection, maintenance, and repairs.

  • The process of purchasing, owning, managing, renting, or selling real estate with the goal of generating a return on investment.

  • The physical property consisting of land, buildings, and natural resources.

  • The revenue generated from renting out a property to tenants.

  • The income generated from renting out the property calculated as a percentage of total investment. Gross Rental Yield refers to rental income before taking into expenses. Net Rental Yield refers to income after expenses such as outsourced management fees, maintenance and repairs, etc.

  • Strategies employed to identify, assess, and mitigate risks associated with property investing, such as market volatility, interest rate fluctuations, or unexpected repairs.

  • A measure of the profitability of an investment, expressed as a percentage of the initial investment amount.

  • A U.S. government program that provides rental assistance to low-income individuals or families, often involving subsidies for landlords who participate in the program.

  • A "short sale," in real estate, is a way to sell a financially distressed property before it enters the foreclosure process.

  • An individual or business entity that occupies and rents a property from the landlord.

  • A legal document that establishes ownership rights to a property. Title searches and title insurance protect buyers and lenders from potential ownership disputes or claims.

  • The percentage of vacant units in a rental property or market. It is used to assess the demand and potential income of an investment property.

  • Local government regulations that specify how a property can be used, including residential, commercial, industrial, or mixed-use zoning classifications.

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