The Motion Property glossary is a comprehensive listing created to support property investors to educate themselves about common property investment and finance terms.


This glossary is intended as a guide only and investors must make their own enquiries to verify terms described in this section.

Financing Your Purchase

Basic Variable – a variable home loan at a lower rate and with fewer features than a standard variable home loan.

Break Costs – fees that are sometimes incurred when a loan is paid off early.

Bridging Finance – a short-term loan used to bridge the gap between buying a new property and selling an existing one. For example, taking out a temporary loan to settle a purchase that becomes due before the date that the longer-term finance becomes available. People who need to sell their property before they can purchase another one frequently seek bridging finance, and when their property is still on the market when settlement of the new property falls due.

Cross-securitisation/Cross-collateralisation – when the financial institution uses your property (whether owner-occupied or investment) as security for other property you purchase.

Drawdown of Funds – to withdraw funds from a designated loan account, common in house and land purchases with a construction loan where building progress payments are drawn down progressively according to construction expenditure.

Equity – the difference between your mortgage and your property’s value. If your home is worth $400,000 and you owe $150,000, then you have equity of $250,000.

Fixed Rate – where the home loan is locked in at a specific interest rate for a specified term, usually one to five years.

Interest-only – only repaying the interest charged on your mortgage, not paying anything off the principal or amount owing.

LMI (lenders mortgage insurance) – usually required by lenders when you’re borrowing more than 80 per cent of the property’s value. It provides insurance to the lender in case the borrower defaults on the loan.

LOC (line of credit) – a facility available from financial institutions that gives you a credit limit that you can draw down at any time. It’s similar to a credit card, except you don’t have to make set repayments of the principal.

Low-doc Loan – relatively new, these are loans that don’t require as much documentation to set up the loan. They are popular with self-employed people and those who have not yet established a credit rating.

LVR (loan-to-value) ratio – to calculate it, divide the loan amount by the value of the property then multiply by 100 to get a percentage. Banks and financial institutions use this as a measure of whether you can afford the loan.

Principal and Interest (P&I) – the amount borrowed or still to be repaid, plus the interest on the mortgage. The principal is part of the repayment that reduces the balance of the mortgage.

Refinance – to obtain new finance for something on different terms, usually involving the paying off of an existing loan by means of a new (and often cheaper) loan.

Reverse Mortgage – designed for seniors who are asset-rich (usually with their PPOR) but cash-poor. The facility allows them to access the equity in their homes without having to sell it. Most often the loan is not paid out until the borrower dies, moves into a nursing home or relocates.

Serviceability – whether you can manage your mortgage payments, based on your income and expenses.


Cash Flow Positive – you have a cash flow positive investment if the incomings are more than your outgoings after tax-deductible items have been claimed. You receive more rent than your mortgage repayments, plus you are still ahead after taking into account items such as interest on the loan, maintenance, insurance, land tax, rates, etc.

Negatively Geared – this is where the incomings are less than your outgoings after all tax deductions have been claimed. For example, you receive rent on a property of $600 a month, but your mortgage repayments are $900 a month. Your shortfall is $300 a month, which you can claim as a loss when doing your tax return. Many people on high incomes use negative gearing to reduce their taxable income.

 Another way to look at this is if the total of deductable outgoings e.g. loan repayments, rates, repairs, exceeds the income (rent for a property) then it is said to be negatively geared. Investors often use negative gearing to reduce taxable income as the loss can be deducted from other earnings. When the property is ultimately sold, then the capital gain should be more than any accumulated losses otherwise it would have been a poor investment.

Positively Geared – this occurs when the investment income exceeds your interest expense (and other possible deductions). For example, the rent you receive may be $1000 a month, but the monthly repayments are only $750. Note that you may be subject to additional tax on any income derived from a positively geared investment.

Buying a Property

Aspect – a compass direction e.g. a northerly aspect or westerly aspect.

Cash Rate/Bank Rate – the cash rate is the rate at which the Reserve Bank of Australia sets interest rates. The bank rate is the interest rate banks offer and is above the cash rate to allow for a profit margin.

Certified Copy – a true copy of an original document that has been authorised in writing by a Justice of the Peace, Commissioner for Declarations or Notary Public.

Commission – the fee payable to the real estate agent for the work performed during the sale (or property management) of the property. The fee is paid by the person who authorised the agent to act on their behalf (usually the seller – or landlord, in the case of property management) and is payable upon settlement of the property (or during the course of the property management period).

Conditions of Sale – the conditions under which a purchaser takes property sold to him. Where real property is the subject of sale the conditions contain provisions as to title to be accepted by the purchaser and how it is to be proved and the amount of deposit. When a sale is concluded, the purchaser signs a memorandum endorsed on the conditions, the whole becoming the contract of sale. Conditions of sale are frequently attached to goods specifying what warranties attach or do not attach and generally, the purchaser will be deemed to have notice of such conditions and they will affect the sale accordingly.

Contract of Sale – an agreement relating to the sale of property which contains terms and conditions of sale. All contracts must be in writing.

Cooling-off Period – a period of time given to the purchaser to legally withdraw from buying a property. The length of time varies in each of the states and territories.

Covenant – is a promise executed under a seal whereby one party promises to another that something has, or will be, done. Covenants can be positive in nature, such as an undertaking by a landlord to perform certain structural alterations to make leased premises suitable for the tenant.

Deposit – money paid as evidence of good faith for the future performance of a real estate transaction. It is normally held by a third party, usually the agent, in a Trust Account or by the developer’s solicitor in a Trust Account. If the purchase is completed, it will be paid towards the purchase price of the property (or in the case of property management, a holding rental deposit).

Due Diligence – ensuring that sufficient analysis has been conducted before recommending an investment to a client.

Easement – right to use the land of another. The most common easements are Right of Way. For example, where a property owner grants a Right to an adjoining owner for that owner to use part of the land to gain access to the adjoining owner’s land.

Encumbrance – an interest or right in property, which usually diminishes the value of the land but does not prevent the transfer of ownership. Any impediment to the use of the land including such things as easements, mortgages, caveats, notices of intention to resume, or leases, which are registered on the title are encumbrances.

Established home – a home that has been lived in previously.

Fittings – items that can be removed from a property.

Fixtures – items affixed to the structures of the land, usually in such a manner that they cannot be removed without damaging the property. The agent must list all fixtures to be included on the contract.

Freehold or Fee Simple – highest form of ownership. An owner can use the land in any way desired, subject to usual zonings and other government controls.

Group Title – similar to freehold except that title also includes common property owned jointly. This must involve a body corporate. Each lot has its own certificate of title and a registered number of entitlements. Entitlements include voting rights and contribution of levies to the body corporate. These may not always be equal. The body corporate owns roads, common areas, facilities and equipment supplied.

Investment Property – land or a building, (or part of a building), held to earn rental income or for capital appreciation, or both. An investment property generates cash flow largely independently of other assets held, and this is the characteristic that distinguishes investment property from owner-occupied property.

Investor – a person who invests money prudently and productively over the longer term with the investment objectives being achievement of a reasonable return and capital growth (appreciation) to preserve purchasing power. Also the opposite of a speculator, who will sacrifice safety of principal, for the possibility of larger gains.

Joint Tenant – two or more ways in which two persons may own property together. The rule of survivorship applies. When a joint tenant dies then the surviving joint tenant automatically gains entitlement to the deceased person’s share of the property. Joint tenants have equal share.

Market Value – as defined by the courts, the highest price estimated in terms of money which a property will bring if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used and assumes a willing buyer and willing seller.

Off the Plan (also known as Off-Market or Off-Plan) – when you buy off the plan, you are buying a property before it is built, having only seen the plans. This is commonly used for apartments or units under construction or about to be built.

POA – price on application. You may see this in a real estate advertisement.

Portfolio (as in property portfolio) – the number and type of investment properties you own.

Self Managed Superannuation Fund – a superannuation fund can be an SMSF if it meets the following conditions:

  • Has less than five members;
  • Each individual trustee of the fund is a fund member;
  • Each member of the fund is a trustee;
  • No member of the fund is an employee of another member of the fund, unless those members are related; and
  • No trustee of the fund receives any remuneration for his or her services as a trustee.

An SMSF can also have a company as a trustee (known as a corporate trustee) if:

  • Each director of the company is a member of the fund;
  • Each member of the fund is a director of the company; and
  • The fund has less than five members, no member is an employee of another member (unless related) and the trustee does not receive remuneration for their services as a trustee.

Some of the advantages people see in running their own superannuation fund:

  • They can have greater investment freedom;
  • They feel the monies are safer being invested by them as trustees;
  • They can actively participate in the management of the fund;
  • There are reduced formal reporting requirements; and
  • Often more flexible retirement planning and estate planning options available.

Strata Title – system of land title based on the horizontal sub-division of air space whereby all the owners combined own the land, but have absolute right to sell/transfer their strata-titled property to a new owner. The most common form of strata title is a home unit.

Torrens Title – most common and simplest form of an individual certificate of title to a property.

Torrens System – this is the name given to a system whereby title to land is evidenced by one document issued by a Government Department.

Trust Account – bank account relating to monies received or held by an agent or a developer for or on behalf of another person. Monies held in trust are protected at law.

Vendor/Seller – person/entity that offers a property for sale.

Foreign Buyers

FIRB (Foreign Investment Review Board) – examines proposals by foreign people and companies to invest in Australia and advises the Treasurer on those subject to the Foreign Acquisitions and Takeovers Act 1975 and Australia’s foreign investment policy.

FIRB Purchaser – a foreign person purchaser who requires FIRB approval in order to be able to legally purchase a property.

Foreign Person – the term Foreign Person means:

  • A natural person not ordinarily resident in Australia;
  • A corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest;
  • A corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest;
  • The trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
  • The trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

Construction Terms

Building Approval – the number of dwellings approved to be constructed in a given month, quarter or year.

Final Inspection Report – a certification issued by a local council or building inspector that building works for a home are complete and the home is ready to be lived in.

Right of Way – A person may have a right to cross your property to gain access to his/her own property or there may be a public pathway across the land.

Square – an old imperial unit of area measurement. 1 square = 10 feet x 10 feet in area, which in metric measure is equivalent to 9.29m2.

Strata Title – system of land title based on the horizontal sub-division of air space whereby all the owners combined own the land, but have absolute right to sell / transfer their strata-titled property to a new owner. The most common form of strata title is a home unit.

Subdivision – a parcel of land divided into individual lots.

Urban Renewal – the process of rehabilitating urban (city) areas, by demolishing, remodelling or repairing existing structures and buildings, public buildings, parks, roadways and individual areas on cleared sites in accordance with a more or less comprehensive plan.


Stamp Duty (also called Transfer Duty) – a state government tax on the transfer of property calculated on the value of the property.

Certificate of Title – the document of title to land held under the Torrens Title system. It shows who owns the land, and whether it is subject to mortgage, lease, easement or any other dealing, which may adversely affect a potential buyer.

Conveyancing – the process that legally transfers property ownership from one entity to another.

Group Title – similar to freehold except that title also includes common property owned jointly. This must involve a body corporate. Each lot has its own certificate of title and a registered number of entitlements. Entitlements include voting rights and contribution of levies to the body corporate. These may not always be equal. The body corporate owns roads, common areas, facilities and equipment supplied.

Joint Tenants – each owner has equal shares and rights in the property.

RP (Registered Plan) – plan number in the Titles Office. The RP number is the sub-divisional plan, which includes the dimensions and details of the particular parcel of land.

RPD (Real Property Description) – method of describing a particular parcel of land. For example, Lot 3 on RP 546789 identifies the plan number and then the particular lot number. A plan search at the Titles Office would give an agent or a potential buyer a copy of the sub-divisional plan and dimensions of each lot on the plan.

Settlement – occurs when the buyer becomes entitled to possession of the property. A formal settlement occurs when the owners hand to the buyer the executed transfer documents and the Certificate of Title in exchange for payment of the balance of purchase monies.

Tenants in Common – two or more buyers own a property with unequal shares and rights.

Title Deed – document showing ownership of property. Also records details of any mortgage, encumbrance and area.

Transfer – the document used to transfer the interests of a registered proprietor to a purchaser by means of lodgement at, and acceptance by the titles office.

Property Valuation and Growth

Appraisals/Valuations – a written report of the estimated value of a property, usually prepared by a valuer.

Appreciation – an increase in value.

Basis Point – a measurement of fluctuation of an investment, equal to 1/100 of one percent.

Capital Growth (Capital Gain) – appreciation in the capital or market value of an investment. The amount by which your investment property has increased relative to what you paid for it. For example, if you bought a property for $400,000 and it’s now worth $500,000, you’ve made a capital gain of $100,000 (the difference between the purchase price and selling price in the sale of an asset (the actual profit made).

Consumer Price Index (CPI) – an index measuring the prices at various times of a selected group of goods and services which typify those bought by ordinary Australian households.  It allows comparisons of the relative cost of living over time, and is used as a measure of inflation.

Diversification – the spreading of investment funds among classes of securities and localities in order to distribute and control risk. This is a fundamental law of investing, meaning simply: Don’t put all your eggs in one basket.

Economic Clock – a model (represented by the face of a clock) for depicting the normal sequence of events for share and property market cycles.  After interest rates fall, the share market rises, followed by commodities, inflation and property.  Interest rates then rise to curb inflation and the cycle goes into decline, before repeating over again. Note that not all cities / states are at the same place on the clock at the same time.

Lower Quartile – the price point below which 25 per cent of sales were recorded. If there were 100 sales in a suburb, the 25th lowest price would be the lower quartile price.

Median Price – the median house price is the middle price of all sales recorded in a particular suburb, postcode, city or state. If there were 100 sales in a particular suburb, in ascending order, the median would be number 50 on the list. It’s commonly assumed that the median price is the same as the average price, but that’s not the case. To calculate the average, you would add up the 100 sales and divide the total by 100 (the number of sales) and the number could be quite different to the medium.

Property Cycle – property values usually follow a cycle of growth, a slowdown, a bust and an upturn. History shows this occurs every seven to ten years.

Rule of 72 – a convenient technique to estimate compound interest rates derived from the fact that a 7.2 per cent return rate per year is the rate that will double the value of an investment in ten years.  Hence, years to double an investment with a given annual rate of return can be estimated by dividing the rate of return into 72.  See chart below:


Similarly, the rate of return needed to double the value of an investment in a given number of years can be estimated by dividing the number of years to double into 72.  For example, if an investor plans to hold an asset for 9 years, it will need a return rate of 8 per cent per annum (72 divided by 9).

Supply and demand – the number of properties on the market at any given time determines the supply-and-demand equation. If there are lots of properties on the market, it’s a buyers’ market. If there are few properties on the market or those that come on to the market sell quickly, then it’s a sellers’ market.

Upper quartile – the price point below which 75 per cent of sales were recorded. If there were 100 sales in a suburb, the 25th highest price would be the upper-quartile price.

Property Management and Rent

Body Corporate – an administrative body made up of all the owners within a group of units or apartments of a strata building complex. The owners elect a committee, which handles administration and upkeep of the building and common areas. Also known as owners’ corporation.

Common Property – 1. Land or a tract of land considered as the property of the public in which all persons enjoy equal rights. A property not owned by individuals but by groups. 2. In a home (villa) unit or flat development that part of the property owned and used in common by all the unit or flat owners or occupiers and which is maintained by the Body Corporate.

Landlord – owner of leased/rented property.

Leasehold – owner of property allows another person to have possession of property in return for rent. Term can vary from 1 day to 99 years. The majority of residential tenancies are either 6 or 12 months. Commercial leases are generally under 10 years and most often for a 3-year period.

Lessee – tenant who has the right to use or occupy a property under lease.

Lessor – landlord who holds title and conveys the right to use and occupy a property under a lease agreement.

Property Management – a division of a real estate office composed of leasing space, collection of rents, selection of tenants and generally the overall maintaining and managing of real estate properties for clients.

Rental Yields (and calculations) – the return on an investment as a percentage of the amount invested. Gross rental yield can be calculated by multiplying the weekly rent by 52 (weeks in a year), then dividing by the value of the property and multiplying this figure by 100 to get the percentage. For example if a property is rented for $400 per week, and the purchase price was $450,000, then the yield is (($400*52)/$450,000)*100 = 4.62 per cent.

Vacancy Rates – a measure of how many dwellings are available for rent over a specified time period. A low vacancy rate means there are not very many dwellings available for rent, while a high vacancy rate means there is ample supply of rental properties.

Vendor – the seller.

Yield – the return by an investor on an investment, shown as a percentage of the amount invested.


Income Protection Insurance – this insurance cover is a cash flow protection method to ensure you can fund your outgoings of daily life and the possible shortfalls of your property portfolio.

Landlords Protection Insurance – insurance designed to protect the Landlord. Common features of a landlord insurance policy include:

  • Malicious or intentional damage to the property by the tenant or their guests (above that which may be covered by Rental Bond monies);
  • Theft by the tenant or their guests;
  • Loss of rent if the tenant defaults on their payments;
  • Liability, including for a claim against you by the tenant, and
  • Legal expenses incurred in taking action against a tenant

Lenders Mortgage Insurance (LMI) – usually required by lenders when you’re borrowing more than 80 per cent of the property’s value. It provides insurance to the lender in case the borrower defaults on the loan.

Life, Trauma and TPD Insurance – this cover is about insurance covering accidents/circumstances which cause death (life cover), a serious health issue like cancer and illnesses that impede your ability to work for a certain time (trauma cover) or a serious impairment that would take away your ability to ever work again (TPD cover).


ATO – abbreviation for Australian Taxation Office.

Capital Gains Tax – a tax payable when/if you sell a property. It’s a tax on the increase in the capital value of investments. Capital gains tax is indexed so that nominal increases in value due to inflation are not taxed as well.  The taxation regime also allows capital losses to be offset against other taxation liabilities (e.g. income tax) in certain circumstances.  This is the tax you pay when you sell an investment property if you’ve made a profit.

Depreciation – as buildings get older and items within it wear out, they depreciate in value. The Australian Taxation Office allows property investors to claim deductions related to the building (Capital Works) and Plant and equipment items in it. The owner of an income-producing investment property can claim depreciation; this has the effect of reducing their taxable income, meaning they pay less tax.

Capital Works – the capital works allowance is a deduction available for the structural element of a building including fixed irremovable assets; this is commonly referred to as the building write off. Only some properties will qualify for this allowance. For residential buildings constructed after 16 September 1987 your accountant can claim 2.5 per cent of its historical construction cost.

Plant and Equipment – refers to removable items in the investment property like carpet, hot water systems, blinds, light fittings and many other items.

PPOR or PPR – principal place of residence. Generally, a residence is your PPR if you live in it (with your personal belongings) on a daily basis. Other factors may be used to determine whether a residence is your PPR, such as:

  • Where your family lives;
  • The extent of time you live in the residence;
  • The address you have your mail delivered to;
  • Whether utilities (e.g. electricity, gas and telephone) are connected to the dwelling and the account(s) are in your name; and
  • If the address of the residence is recorded against your name on electoral rolls

Tax File Number (TFN) – a number allocated to taxpayers by the Australian Taxation Office.  The TFN is used by the Australian Taxation Office to match income and taxation details.