This is the final installment of our series on understanding real estate terminology. I hope that you have found this series to be useful and beneficial.

• Principal is the amount of money that you borrow. Every time you make a payment on your mortgage you reduce the principal.
• Rates are the annual, quarterly, half-year or monthly payments that need to be paid to the local shire councils for things such as water, sewage, garbage collection and other various amenities. Some rates are also levied to help cover the cost of improvements to the roads and parks. Council Rates are a separate form of property tax that is influenced by property values. The more your property is worth, the more you will be assessed for rates. The rate that you pay will increase as your property value increases.
• Repayments are estimates of how much the minimum amount of money you would need to pay in order to pay off your home over the full term of the loan. Be careful when reading these, as they can be pretty scary.
• Restrictive Covenant is a promise that you agree to refrain from doing something. Some properties have restrictive covenants that prohibit building within so many feet of a body of water. Restrictive covenants can be enforced by a third party.
• Strata Levies vary depending on the age and condition of the building. In tall buildings, or high rises maintenance on the lift can cause the strata levies to increase. Typically these levies range from $300-$3000 every quarter.
• Tenant is a person who pays you to live on your property. The property still belongs to you, but they are paying for the right to live there under a contract. Real Estate agents can take care of helping tenants find a place to live and bringing qualified tenants to landlords.
• Timeshares are buildings or condos that are owned by a large number of people who have the “right” to use their share of the property for one to two weeks a year depending on the terms of their contract.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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Now we will continue with a look at common real estate words and what they mean.

• Easement is the right to use some or all of the land that is owned by someone else for specific purposes. For instance if there is a river that borders your property you may have an easement through your land to allow workers access to the river.
• Economic Obsolescence happens when your property losses value through no fault of you own. This would happen if a rubbish dump, or toxic waste facility was built right next to your property.
• Enduring Power of Attorney refers to the written authorization that one person gives to another person allowing them to make legal decisions for them. This usually happens when a person becomes sick or incapacitated in some way that prevents them from making important financial decisions on their own. Enduring Power of Attorney should only be given to a trusted person.
• Fixture refers to any item in a home cannot be removed from the home without causing damage. Examples of this include a built in hot water system, kitchen countertops and cabinets, the toilet, stove, sinks, bathtub and other such items.
• Gated Communities are areas that are enclosed within a fenced in developed area. These areas often afford an added element of safety due to the enclosed nature of the property.
• Gazzumped happens when an agent that was supposed to be helping you stabs you in the back and helps themselves instead. This occurs when you are interested in purchasing a property or asset and the agent purchases it for themselves. This is often done through the use of a shelf company or a third party.
• Gearing. There are two different types of gearing. Negative gearing occurs when you borrow money in order to invest in an income producing property and you don’t end up making back as much money as what you borrowed. An example of this would be if the interest that you have to pay on the money that you borrowed is higher than the rental process that you get from the property itself. You are actually losing money this way. Positive gearing occurs when you make more money than the amount that you borrowed.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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