Deciphering investor terminology can be a daunting task. We understand that one of the toughest parts of beginning your journey as a property investor is encountering terms that you may not understand. It’s important to us that you feel comfortable in knowing where you’re putting your financial trust. Therefore, we are providing you with this breakdown of key terminology in the hopes that you can feel comfortable moving into your next investment.
Let’s begin with the basics. The capital gain of your investment property is the amount by which a property increases in value relative to the amount for which is was purchased for. This is an important aspect when investing your time and money into a property, as we all want that strong return in the long term. The higher your capital gain, the better your investment.
Terms you will often hear in the property investment market are positive gearing, and negative gearing. When your investment property earns you less than your outgoing costs after all tax deductions are taken into consideration, it is classified as negatively geared. On the contrary is a positively geared investment. This is where the income from a property exceeds the expenses you have made, or in other words, this means you are making money on the property. Although we can all agree increasing your financial status is the ultimate goal in any investment, do keep in mind that you will need to pay tax on your income.
To keep it simple, stamp duty is a state government tax that is applied to the transfer of property. This commonly used term enforces the need for awareness around the massive cost consideration when purchasing a property. Use online resources to calculate your stamp duty prior to committing to an investment property; you can never be too careful when it comes to ensuring your financial stability preceding an investment commitment.
BONUS TERM: TIME VALUE OF MONEY
Although this term is simple in itself, we want to highlight its importance in the scheme of your investment property. Time value of money is the underlying assumption that money, over time, will change value. As in the phrase itself, this term is all about timing, so it is an important aspect to remember when investing your time and money into a new property.
In this digital world, we have everything at our fingertips, make sure to use online resources to your advantage when you’re looking to invest. We understand that investor terminology can be overwhelming. The Ray White team are always happy to answer any questions or soften any concerns you may have when it comes to deciphering investor expressions.