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| Glossary This glossary contains some of the more common terms used when referring to Australian real estate, particularly when buying, selling and investing. It is however, by no means exhaustive and if you can't find a particular word here, please email us and we will endeavour to answer your question. Acceptance Agree to the terms and conditions of an offer or contract. Accommodation Facility Premises used, or suitable for use, as accommodation of persons on either a long-term or short-term basis, including, in particular, hotels, motels, hostels, guesthouses, serviced apartments and holiday units. Auction A public sale where the property is sold to the highest bidder, provided the seller's reserve price has been reached or exceeded. Note, there is no ‘cooling off period' and unconditional contracts are exchanged immediately, and a deposit is paid by the purchaser. Most inner Sydney property is sold by public Auction. Beneficiary Any person designated as the recipient of funds or other property under a trust or will. Body Corporate The owners of the units within a Strata titled building form a Body Corporate. These owners select a council who are responsible for the maintenance of the building (which includes all common areas). Bond A rental bond is an amount of money paid by a tenant and held by the State Government as a form of security for the landlord against any future breaches of the tenancy agreement (usually equivalent to 4 weeks rent for unfurnished property). Carport An open-sided roofed structure used to park cars - common alternative to a garage in Sydney properties. Capitalising a loan Allowing the interest on a loan to build up without paying any repayments at all. The loan balance will increase. Capital Gain The monetary gain obtained when an asset is sold for a higher price than originally paid for it plus expenses incurred in purchasing, holding and disposing of it. Certificate of Title (CT) A copy of the related Folio and Torrens Land Title Register which details the name/s of the owner/s, the Lot/Plan numbers, dimensions of the land, details of any mortgages and encumbrances (outstanding charge/liability on a property). Common Property An area which is owned by all tenants of a strata property. Company Title Owners of these units are shareholders in a private company. The approval of the majority of shareholders is necessary if you wish to lease or sell your property. Contract of Sale A written agreement which details the terms and conditions regarding the sale or purchase of a particular property. Conveyance The legal process involved in transferring the ownership of a property. Commercial Real Estate Non‑residential urban real estate, including offices, factories, warehouses, hotels, restaurants, shops, recreation facilities etc. Commercial zoning is determined by the local council. Cooling Off Period There is a compulsory cooling-off period on NSW residential property of five working days from the date contracts are exchanged, during which the purchaser may rescind the contract, but they forfeit 0.25% of the purchase price. Conveyance The transfer of an interest in real property from one person/entity to another. Back to Top Deposit A deposit is required at the time you sign the Contract of Sale to purchase a property - usually 10% of the purchase price. It is placed in a trust account (usually the vendor's agent until settlement, with the interest being shared equally between the parties). Depreciation The writing-down of the cost of an asset over its effective life. Developer A developer refers to the person who owns the land on which a dwelling is being/was constructed. A builder is not necessarily a developer but can be employed by a developer to construct the dwelling(s). Direct Investment A non-portfolio investment. Discretionary Trusts A type of trust whereby the trustee has the power, or discretion, to affect the distribution of the income or corpus (assets) of the trust such that one person can be paid all the income of the trust or receive all the corpus of the trust. The trustee usually has the authority to add or delete beneficiaries. Equity The value of an investment less any loan amount outstanding. Exchange (signing) of contracts Each party to the contract hands the other a signed and dated copy of the contract and the purchaser pays a deposit that is usually 10% of the purchase price. This exchange is usually done at a meeting between the parties and the agents or solicitors involved, but can also be done by post or fax. First Home Owner's Grant A grant available to Australians who are buying or building their first home, and have not previously owned a home, either jointly, separately or with some other person. Fixtures & Fittings Items such as baths, stoves, blinds, lights, built-in wardrobes etc. attached to the property. Generally, if fittings can be removed without causing damage to the property they are not considered to be fixtures and fittings and are not included in the contract. Foreign Investment Review Board (FIRB) Foreign purchasers intending to acquire real estate in Australia must first seek approval from the Government through the Foreign Investment Review Board unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations. Freehold An interest in land that runs for an undetermined duration. Back to Top Gazumping Where the seller agrees to sell their property at an agreed price, but before the Contract of Sale is signed and exchanged, the property is sold to another buyer, generally for a higher price. Gearing Borrowing money to invest (leveraging). Positive gearing - borrowing to invest in an income producing asset and the returns (income) from that asset exceed the cost of borrowing. Negative gearing - borrowing to invest in an income producing asset and the cost of borrowing exceeds the returns (income) from that asset. Initial Investment The total expenditure expected to be associated with the proposal in its first 12 months of operations, including the value of any assets leased. Interest The sum charged by the lender, calculated on the outstanding balance of borrowings in return for supplying you with the funds. Interest-only loans A loan on which interest only is paid periodically and the principal is paid at the end of the term. Joint Tenancy An interest in land that is shared equally by the tenants. Upon death of a tenant, the surviving tenants acquire their shares with the last survivor obtaining full rights to the land. Landlord The owner of an investment property. Land Tax A tax levied on the owners of land as at midnight on 31 December of each year. In general, a principal place of residence (a home) or land used for primary production (a farm) is exempt from land tax. Amount varies from state to state. Lease A document granting possession (tenancy) of a property for a given period without conferring ownership. The lease document specifies the terms and conditions of occupancy by the tenant. Lessee A person (or legal entity) who leases a property. Lessor The owner of a property who leases the property to another person (or legal entity) Leverage Property To utilise the capital growth in any one investment property to invest in more properties. Back to Top Market Estimate of Value Estimate of the selling price of a property for sale, based on current market conditions and recent local sales - not given by a registered valuer. Mortgage Legal agreement containing the terms and conditions of a loan for the purpose of buying real estate, whereby the person offering the mortgage takes security over the property. Mortgagee The lender of the funds (money) to purchase the property. Mortgagor The person who borrows the funds (money) to purchase the property. Negative Gearing See Gearing New Dwelling A residential dwelling that has not previously been sold or occupied. Off The Plan Property in Australia can be purchased before it is built. It is purchased ‘off the plan', rather than inspecting and purchasing a completed structure. Niche market property Property that is zoned residential but provides for specific markets, such as tourism, child day-care centres, retirement, student accomm and the like. Passed in A property being sold by Auction is 'passed in' when bidding fails to reach the reserve price set by the vendor. Positive cash flow The net positive income earned on a property after adding rent plus tax breaks and deducting actual property costs. Positive gearing See Gearing Principal place of residence A person's sole place of residence, or if a person has more than one place of residence, their primary or main place of residence. Private Treaty sale Method of sale where the vendor sets an asking price and the property is sold by negotiation. Back to Top Rate of Return - the percentage change in the value of an investment in an asset (or portfolio of assets) over a specified time period. Reserve Price The minimum price a vendor is prepared to accept when selling at auction. After bidding reaches the reserve price it will be sold to the highest bidder. Residential Real Estate All Australian urban land other than commercial properties (that is, offices, factories, warehouses, hotels, restaurants, shops, recreation facilities etc). Acquisitions of 'hobby farms' and 'rural residential' blocks by foreign interests are included within the residential real estate category. Return on Investment (ROI) A measure of the profitability that is generated by the use of investment funds. It is equal to ‘profit + investment'. Settlement The final stage in the transfer of property where the purchaser of a property pays to the vendor the balance of the purchase price, plus any adjustment for rates etc. to become the legal owner of the property. The vendor, in turn, hands over the certificate of title, the transfer and the keys to the property. Stamp Duty A state government tax imposed on the sale or transfer of land or a business in NSW. (varies in each state) Duty must be paid within three months of the date of exchanging contracts, unless buying ‘off the plan' or a house and land package. NSW Contract Stamp Duty Scale Purchase Price Rate Up to $14,000 .................. $1.25 per $100 ($10 min) $14,001 - $30,000 ............ $175 plus $1.50 per $100 $30,001 - $80,000 ............ $415 plus $1.75 per $100 Over $80,000 ................... $1,290 plus $3.50 per $100 Over $300,000 ................. $8,990 plus $4.50 per $100 Over $1,000,000 .............. $40,490 plus $5.50 per $100 |
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