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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Here’s another installment of real estate terms as we work our way through the alphabet for a better understanding of property investing and related transactions.

• Mortgage is a pledge that you make to a creditor as security for performance of an obligation to a debt or to repay that debt. Your Australian mortgage can be negotiated so don’t be afraid to ask.
• Mortgage Indemnity Insurance is insurance that you pay that benefits your lender. This type of insurance is designed to reimburse your lender if you borrow a high proportion of the value of your property and can’t keep up with your mortgage repayments. Your credit provider can insist that you pay for this type of insurance under Australian law.
• Mortgage Offset Accounts allow you to offset the interest charged on your mortgage by using a credit balance against the mortgage debt. For example is your mortgage is $200,000 and you have a credit balance of $50,000, the interest is only charged for the net balance of $150,000. These type of mortgages provide a lot of security by allowing you to access funds in the event of an emergency.
• Neighbors are the people and building that are in close proximity to your dwelling. Neighbors play a very big role in your happiness or unhappiness in an area. Make sure you check out the property that you are interested in at many different times of the day and night to get a feel for what your neighbors are like at these times. This way you can be sure that you are not moving in next to the all night parties, or the early morning noise makers.
• Open House is when a real estate agent opens up a house for a pre-determined amount of time to allow the public access to the home to view it. Open houses usually only last for a couple hours and are considered to be low pressure ways to generate a sale.
• Option Fee is a deposit that you give to a real estate agent to hold an option period allowing you to further consider purchasing the property without putting any money down on it. The money spent on the option fee will go to the vendor if you decide not to buy the property.
• Over Capitalized means that you have paid too high of a price for a property or that the property has been upgraded so much that it is worth much more than similar properties in the area. When real estate has been over capitalized it is difficult to recoup the investment.

Check back next time for the next installment to help you get a better understanding of real estate terminology.

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

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And now, the latest installment of definitions to help you understand the myriad of real estate terminology.

• Home Equity Loans are a line of credit that is secured for the purpose of buying a home. This is a first registered mortgage over your residential property.
• Investment Property refers to a piece of property that has been purchased with the express purpose of netting a profitable return on the property. In Australia right now a good investment property would be any rental residence. Investment properties that meet the demand of renters can net a good profit especially along the Gold coast.
• Interest is the fee that is paid to the lender of a loan. There are two different types of interest. The first is called ‘simple interest’ or ‘flat rate interest. This type of interest has a fixed amount of interest that is paid each year on the amount of money that has been borrowed. The other kind of interest is called ‘compound interest’ Compound interest is calculated on the initial principle as well as the accumulated interest over previous periods.
• Land is whatever the deed holder owns up to the sky and down into the Earth. A few exceptions are mines and minerals which are owned by the State and the air space is limited to reasonable usage.
• Lease is a verbal or written document that allows a person to gain possession of a property for a specific amount of time without actually owning the property. The lease usually outlines terms and agreements in relation to the property in regards to rent and time of occupancy.
• Leverage happens when you borrow money to purchase an investment. In order to magnify the rate of your profits from capital growth or your income from the investments. Often times investors will leverage one property in order to purchase another.
• Lien is a form of security interest that is granted over an item of property to secure the payment of a debt or performance of some other obligation.

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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In this post you we will explore some more real estate terminology to help guide you through the world of real estate with a better understanding of what all those phrases mean.

• • Capital Gain is the tax that you have to pay on any capital gain that you make. It is an additional component of your annual income tax. When you make a net capital gain, as in from the sale of a real estate investment property, you are taxed at your marginal tax rate.
  • Clear Title pertains to land or property that does not have any liens debts against it including a mortgage. This is property that is owned free and clear.
  • Collateral is something of value that you would use as an asset to secure a loan.
  • Conveyancing is the legal work that is involved in the preparing of sales contracts, mortgage paperwork and any related documents that are used when you buy or sell a home, land or investment property. Conveyencing can be done by a licensed conveyancer, a solicitor, or you can do it yourself.
  • Covenant is the agreement of one party to adhere to certain terms, conditions or restrictions in regards to a certain property. Covenants are usually only valid if they are noted on the title to the land. A covenant is also defined as a lawful restriction on the use of the property or on improvements permitted on the property. For instance, some lake side properties may have covenants restricting the building of an addition or dwelling closer to the lake.
  • Decrement is a decrease in the size of a property due to erosion.
  • Developer is the company or person who purchases a property with the express purpose of developing the property and reselling it for a profit. Some areas are trying to restrict developers from purchasing land in Australia in order to protect the ecological system.
  • Dual Occupancy refers to a block of land or a building that is zoned to allow the owner of the property to reside with additional living quarters, separate from the owner. An example of a dual occupancy dwelling would be a duplex, or a granny flat.

Check back next time as we continue to explore the fascinating world of real estate terminology.

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

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