Glossary of Real Estate Terms

Capital gains: discussed on its own page.

Equity: discussed on its own page.

FHOG: the Australian First Home Owner's Grant, which is available to people over 18 who have not owned their own house before. People who have bought an investment property but have never lived in it are typically entitled to the First Home Owner's Grant. Full information can be found here.

Flipping: buying a house, doing a fast renovation to it to add value (such as a quick coat of paint), and then selling it again in as short a time frame as possible.

HWS: acronym for hot water service.

IP: acronym for Investment Property.

LVR: loan to valuation ratio. It is the ratio of the amount of equity you have in your house to the amount of debt you have. The bank works it out based on a formal valuation from a professional valuer. For example, if you have a $20,000 deposit and you are buying a house that the bank has valued at $200,000, your LVR is 90% because you have a 10% deposit.

Mortgage Insurance: insurance (that you pay for) that protects the bank if you can't pay. It tends to come into play when you have a deposit smaller than 20%, or sometimes 40% if you are self employed.

Overcapitalisation: when you spend more on renovating or building a house than it will be worth when you sell it. A good example of overcapitalisation is installing expensive pure wool carpets in a house in a low socioeconomic area. The people interested in renting or buying your house might only care that it has carpet at all, so expensive carpet adds no more value than cheap carpet would.

PPoR: acronym for Principal Place of Residence, ie the home that you normally live in.

Yield: yield is usually expressed as a percentage. It is the ratio between the amount of rent a house can make, and its current valuation and is usually expressed as gross yield before expenses like council rates. For example, a house earning $300 a week that is worth $350,000 has a gross yield of around 4.5%. Expenses can really skew a yield downwards, for example a unit that appears to have a very high yield may actually have very high strata fees that dramatically reduce the yield. This is why you should always check all the expenses a house has.