If you are solely responsible for repaying a loan, meaning that you make all the repayments from your personal income, and if there are no tax concessions, this is bad debt.
Is the increase in value of an investment property over time. It is the difference between the current market value and its purchase price.
Looks at all the money going into your account and all the money coming out. You can carry out a cash flow analysis of your household, business, or investment property. It is imperative that you have a healthy cash flow and remain solvent. This means you must have more money going in than going out. You can carry out a cashflow analysis over any period of time you like for instance a week, fortnight, month, year.
Is when you have agreed to purchase a property which includes conditions. The most common condition is “Subject to Bank Finance”, but other common conditions may include being subject to a satisfactory building condition report or a satisfactory pest inspection. You can add as many conditions as you like when purchasing a property, but they must be agreed to by the seller and they must be included at the time of negotiating the purchase of the property.
A deposit is used to secure the property. Deposits are usually 10% of the purchase price however you can negotiate the size/amount of the deposit. You can use cash to pay the deposit or instruments such as Bank Guarantees or Deposit Bonds. These instruments can be used in lieu of cash, but this must be discussed with the seller when you are negotiating the purchase of the property.
This is the amount of money you have tied up in a property. The value of the property less the amount of the borrowings is your equity.
These are the items included as part of the building. If you could pick up a property and shake it, the items which don’t fall out are fittings and fixtures. These include items such as kitchen cabinetry, stove top, benches, taps, showers, vanities, shaving cabinets, fixed mirrors, light fittings etc.
This type of debt can still be in your name, or the name of your Company or Trust, and it is still ultimately your responsibility to repay it, however this debt has the advantage that someone else is helping you pay it (ie a tenant renting your investment property) and tax concessions can apply.
These are becoming increasingly popular with investors because they let you minimize your mortgage repayments. IO Loans require that you only pay the interest on the loan as opposed to the standard principal and interest loan where you pay back part of the loan with each repayment plus the accrued interest
The LVR is an important tool financial institutions use to assess the lending risk that a lender assumes by providing a loan to the borrower. It simply compares the size of the loan to the value of the property.
These investments cost you money. Your investment is negatively geared when your expenses exceed your income. With an investment property it is when the rent received does not cover all the property expenses such as interest on borrowings, insurances, rates etc.
Is when the income generated from the investment is enough to cover all expenses and there is no money left over. In the case of an investment property, it means that the rent received is enough to cover all expenses such as interest on borrowings, insurances, or rates etc and the owner does not have to contribute any of their own money.
These investments make you money, not just from capital growth but every time you receive income from your investment. That’s because the money these investments generate exceeds their expenses. In the case of an investment property, it means that the rent received covers all expenses including interest on borrowings, insurances, rates etc and there is money left over for the property owner.
Standard bank loan where you pay back part of the loan with each repayment plus the accrued interest
Is the total number of investment properties you, or your Company or Trust own.
This is when you get a new, usually larger loan to replace your current loan. Typically, the reason you would do this is to receive money in your bank account.