Glossary of Terms, Definitions and Acronyms used in ILRE

1 into …

A shorten way to say subdividing the original block into multiples. For example 1 into 3 means taking the original block and subdividing it into 3 separate blocks.

Access

Areas of entry into the property such as drive way.

Acquisition Costs

The total cost of purchasing a property such as Stamp Duty, Agent Fees, Loan Establishment Fees, Building and Pest Inspections and any other purchase costs.

Addition

Increasing the overall area of the property through construction or modification. For example the “Addition” of a extra bedroom.

Appointer

The Appointer is one of the named Beneficiary (someone who can benefit from the distribution of the trust) who has the power to sack the old Trustee and appoint a new Trustee.

Asset Protection

The process of structuring, insuring and putting processes in place to ensure that there is reduced risk in litigation succeeding in gaining access to all your assets.

Assets

Items that help produce an income as you hold onto it, for example shares or positive cashflow investment properties.

B.A.

Building Approval. The process of submitting your Building Plans for the approval of the council to allow you to construct or renovate your property to strict requirements.

Bad Debt

Usually Debt incurred to purchase consumables (cars, motorhomes, boats etc…) that are not tax deductible and to a lesser extent your personal home loan.

Battle Axe/ Hatchet Block

A type of subdivision where the property sits on one corner, with an ability to add a second dwelling in the back. The new block forms the shape of an axe and the new driveway forms the shape of the handle, thus a battle ax or hatchet shape block.

Beneficiary

The named person in a Trust that will benefit from the distribution of funds sitting in the Trust.

Body Corporate/ Strata Management

A property management entity that usually deals with property complexes such as Apartments, Units or Villas. They are in charge of the upkeep of the common areas of the property and the external areas. Each landlord or owner will contribute funds for the body corporate.

Borrowing Capacity

It is the amount of money the banks are willing to lend to you based upon your assets, liabilities, income, expenses and other factors.

Cash Cow

A income producing property deal where the money coming in, exceeds all the money going out, such as mortgage interest, costs, fees and the property related cots.

Cash Flow

The movement of money whether it is income or an expense to pay out.

C.G.T.

Capital Gains Tax is the tax that is applied according to the profit you have made on the sale of the investment property.

Cheapie

A term used by Dymphna to mean a property that is inexpensive.

Chopper

A large land (acreages for example) subdivided into many smaller lots.

Chunk Deal

A type of property deal that will either sell to produce a ‘chunk of money’ or hold with the ability to refinance a ‘chunk of money’ (equity) from the property and still remain positive cashflow, neutral or slightly negative.

Clumping

Securing multiple sites next to each other, usually under a Option Contract

Corporate Trustee

A Trust is an entity (like a child) that can own things, a Trustee is like a Legal Guardian that makes decisions for the Trust, and so a Corporate Trustee is a Non-Trading Company that is the Guardian of the Trust.

Cross Securitisation

The use of different securities, such as your home and your investment property to secure it against a loan or mortgage of a single lender. It’s the classic case of putting all your eggs in one basket.

Crossover

The area where the driveway on the private property joins onto a public road.

D.A.

Development Approval. The process of gaining approval from local authorities such as the council to agree to the development of the site with specific requirements that must be met during the construction of the properties.

Detached House

A property that sits by itself on a block of land.

Due Diligence

The process of research and analysis to make an informed decision on a deal. Such as finding out the demographics, industries in the area, feasibility and many other factors that may influence your decision.

Duplex

Two dwellings that are attached to the same wall. It may have a single or two separate titles.

Equity

What your property is worth after you have taken account of what liabilities you still owe. For example your property is valued at $500,000 and you still owe the bank $300,000 then your equity is $200,000.

Feaso

Short for Feasibility. The analysis or study of a project working out all the possible expenses against the projected sales of the property and see whether or not the project is feasible to continue.

Goal Stealers

A type of person who’s negativity and judgement impacts on your ability to improve and move forward to your goals!

Good Debt

Usually Debt incurred during the process of creating an income, such as investment property loans, share investment loans or business loans (for profitable businesses).

G.S.T.

Goods and Services Tax, in some countries it’s known as VAT. If you are operating a business, the GST is kept on behalf of the Government and will need to be paid to them quarterly in the form of Business Activity Statements (BAS).

G.V.A. (Grid Variance Analysis)

A type of methodical analysis of each suburb or subject (i.e Storage Units) to find an area with the highest amount of variation between median values. This research tool is used to help us discover which area to target inline with our strategy.

In Fill

Council allowing smaller blocks of land size to be developed

J.V./ Joint Venture

An agreement with another partner or partners to do a project together. Usually you want to partner with someone who is a strength to your weekness. For example, someone good at feasibility can partner with someone who isn’t, or someone with time and management skills can partner with someone who have money to carry out the project.

Land Surveyor

They will map out the exact dimensions of your property as well as take note of neighbours location, trees, access points, elevation etc…usually this is the initial step in getting your property ready for drafting if you are planning on getting a Development Approval.

Lease Option Purchases

A type of agreement between the Vendor and the Purchaser where they have the exclusive right and Option to purchase the property at the end of the agreed Lease period. A portion of the lease amount may be used to reduce the purchase price of the property depending on how the agreement was set up.

Leveraging

The ability of using other people’s money to spread your equity to make a gain.

Liabilities

Items that costs you money as you hold onto it, for example credit card debt or interest free store purchases.

L.V.R.

Loan Value Ratio is the value of the loan divide by the value of the property expressed as a percentage. For example $400,000 loan / $500,000 purchased price = 80%. The LVR is used to determine the amount remaining that has to be covered by the Purchaser or Mortagee.

Manufactured Growth

The process of adding value to the property to gain equity, such as renovation, subdivision or strata titling and others.

Market Analysis

To understand the target area you are investigating. You want to be able to find out comparable sales in the area for similar type of properties and compare other sorts of information. In other words you want to be an area expert.

Market Ready

To get all your finances, documents, paperwork and taxes up to date so that you can jump into the right deal as soon as you have found one.

Motivated Seller

The Vendor/Seller that has a reason for selling the property at a discount, reduced price or other terms. For example Deceased Estates, Mortgagee In Possessions, Divorce or other reasons.

Multies

Can apply to Residential or Commercial Properties, this strategy usually have multiple tenants. For example a block of units or a Commercial Shopping Strip.

Natural Growth

The process in which the property will increase in value due to market forces.

Negatively Geared Property

The property is losing money and you are hoping that if you keep it long enough the Capital Growth will make up the loss. This is the worse form of Real Estate Investing, even if you can make deductions from your tax, you lose $1 just save up to 45% in tax, meaning you are already $0.55 behind.

No Money Down Deals

The execution of particular strategies that allows you to enter into deals with no money. Or using creative strategies that allows you to increase the value of the property and refinance the equity and costs you put in, effectively making it a 100% loan and thus making it a no money down deal.

O.P.M.

Other People’s Money

Opportunity Cost Analysis

Is a calculation where you work out whether or not to SELL or HOLD the property based on the investment returns you make on the property and whether this return can be better elsewhere.

Overcapitalising

The process of over spending on the improvements of a property in which the end value will not cover the expenses incurred in the improvements.

Passive Income

Income that comes in regardless if you are working or not working for it.

Peg In The Sand

A symbolic statement for Dymphna which represents the process of clearly defining your goals and knowing exactly what it is you are aiming to achieve.

Percentage Point Split Rule for Commercial

Positive Cash Flow for Commercial Property is worked out differently, take the current net yield minus interest rate give you percentage cash flow. For example 11% (net yield) – 5% (interest rate) = 6% Cash Flow Return.

Positive Cash Flow

The property is positive cash flow when the income generated is greater than all the expenses, interest payments, fees, rates and taxes paid. In other words it gives you extra money in the pocket after all expenses are taken care of.

Positively Geared Property

The property is initially losing money, that is the expenses out way the income, however after tax deductions you are getting your money back. In some instances you can get your accountant to do an adjustment so that less tax is taken from your payroll so that you can have access to your money sooner rather than wait for your tax return.

P.P.R.

Principle Place of Residence. Your home or place of main residence.

Purchaser

The person buying the property.

Quantity Surveyor

A professional who will work out any depreciating items in your investment property to work out deductions against your investment income.

Rule of 72

A very quick guide in working how long it will take a property to double in value. The formula is 72 divide by consistent growth rate will equal years to double investment. For example 72/10% growth rate per year = 7.2 years needed to double your investment.

Rule Of Two

For a property to be positive cash flow, take the purchase price of the property x 2 and divide by 1000. For example: Purchase Cost is $800,000 x 2 => $1,600,000 / 1000 = $1600 weekly rent needed.

Smart Money Flow

The movement of money where you try to reduce the debt that has the least amount of tax breaks. You try to pay off that debt as quickly as possible.

S.M.S.F.

Self-Managed Super Fund, as the name implies you self manage your own superannuation by making decisions on where the money is to be invested. There are lot of intricacies of this process and it is highly recommended that you seek professional advice.

Splitter

Single Titled Property with big enough land to divide into smaller blocks with separate titles

Succession Planning

The process of working out what will happen to your assets upon your passing.

Superannuation

A forced savings plan initiated by the government for your retirement. Your employer has to deposit small part of your pay into your chosen Superannuation Fund, who will manage the growth of your savings through various investments such as Bonds, Cash, Commodities or Shares.

S.W.O.T. Analysis

Strength, Weakness, Opportunies and Threat Analysis. Strengths are what you are currently strong at, for example equity or cashflow. Weakness conversely is what you are weak at and you will need to work on, Opportunities are what weaknesses or weak strength you can work on to make the most out of the situation. Threat are things around that may cause a problem, such as sewerage problem, building companies taking more than they can afford.

The Pebble In The Pond Effect

Dymphna’s analogy of prices effects, where the rippling effect would move outwards from one suburb to its surrounding suburb.

Town Plan (Council)

A Town Plan is a set of strict guidelines created by the State Government and Council to dictate how the Town or Suburb is to be built and progress. It may include Planning Zones for Residential, Commercial, Industrial, Height Restrictions and many other articles.

Town Planner

Professionals who are trained to understand the Town Plans associated with an area. They are consultants who may be able to help with your Development Approval Application.

Trust Structures

A type of structure primarily used for Asset Protection. A more detailed explanation can be found in the MasterClass Section Under ILRE Fundamentals – General Section

Trustee

A Trust is an entity (like a child) that can own things, and a Trustee is like a Legal Guardian that makes decisions for the Trust.

Vacancy Rate

The percentage rate or days in of which the property in the suburb remains vacant

Valuations

The process of evaluating the value of your property by a Valuer who is usually a third party company that is on consignment from the banks. Preparations with comparable in the area, the type of finish and art design of your property may help with getting a more positive figure for you.

Vendor

The person selling the property.