Property Investment Jargon
- Karenza Hill
- Dec 9, 2025
- 2 min read
Are you confident in your property investment knowledge? If terms like negative gearing or LVR sound confusing, you’re not alone. Understanding these concepts can help you make informed decisions—whether you’re managing existing properties or planning your next purchase. Let’s break down the jargon into simple, practical explanations.
Key Property Investment jargon you should know
Negative Gearing: When Costs Exceed Income
Negative gearing occurs when your property expenses—such as mortgage interest, council rates, and maintenance—are higher than the rental income.
Example:
Rental income: $25,000
Annual costs: $35,000
Shortfall: $10,000
Why it matters: This shortfall can often be claimed as a tax deduction, reducing your taxable income. Many investors use this strategy when aiming for long-term capital growth.
Question: Could negative gearing align with your financial goals? Or would positive gearing suit you better?
Positive Gearing: Income Outweighs Expenses
Positive gearing means your property earns more than it costs to maintain.
Example:
Rental income: $30,000
Annual costs: $20,000
Positive cash flow: $10,000
Consideration: While this boosts cash flow, the income is taxable. Is this strategy right for your situation?
Depreciation: Claiming Wear and Tear
Assets like carpets and appliances lose value over time. Depreciation allows you to claim this decline as a tax deduction.
Tip: A Quantity Surveyor can prepare a depreciation schedule, potentially saving you thousands.
Capital Gains & CGT: Profit from Growth
When your property’s value rises, the profit is a capital gain.
Example:
Purchase price: $500,000
Sale price: $600,000
Gain: $100,000
Important: Capital Gains Tax applies when you sell. Planning ahead can help minimise its impact.
Equity: Your Hidden Wealth
Equity is the portion of your property you own outright.
Example:
Property value: $600,000
Mortgage: $100,000
Equity: $500,000
You can use equity as security for loans, funding renovations or new investments.
Rental Yield: Measuring Performance
Rental yield shows how much income your property generates compared to its value.
Formula:
Annual rent ÷ Property value × 100
Example:
$26,000 ÷ $650,000 × 100 = 4%
Loan-to-Value Ratio (LVR): Borrowing Power
LVR compares your loan amount to the property’s value. Most lenders prefer 80% or less to avoid extra costs like Lenders Mortgage Insurance (LMI).
Ready to take the next step now you know this Property Investment jargon?
Understanding these terms is the first step to confident investing.
Want tailored advice? Contact us today—we’ll help you create a strategy
that suits your goals.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Comments