Why Jargon Exists
As Adel Pearce writes in 'From Payslip to Property': the finance industry makes things complicated on purpose. Complexity creates confusion. And confused people either freeze or hand over control to "experts" without questioning.
At Delphi & Co, we believe everyone deserves to understand their money. So here's every property investing term you'll encounter - in plain English. Whether you're just starting to look into using your home equity to invest or you've already started the journey, this glossary has you covered.
The Essential Terms
Equity
The difference between what your home is worth and what you still owe on it. If your home is worth $800,000 and your loan balance is $400,000, you have $400,000 of equity. It grows two ways: you pay the loan down, and the property rises in value.
Usable Equity
The portion of your equity a lender will actually let you borrow against. Lenders typically want you to keep a buffer of around 20% of your home's value, so usable equity is roughly your home's value multiplied by 80%, minus your loan balance. This is the number that funds most people's first investment property deposit. We break it down fully in our guide to usable equity.
LVR (Loan-to-Value Ratio)
The size of the loan compared to the value of the property, expressed as a percentage. Borrow $480,000 against a $600,000 property and your LVR is 80%. The lower the LVR, the more comfortable lenders are. It's one of the main levers behind how much you can borrow.
Offset Account
An everyday account linked to your home loan. Every dollar sitting in it "offsets" your loan balance, so you're only charged interest on the difference - but the money stays accessible whenever you need it. A simple, flexible way to cut interest without locking your cash away.
Interest-Only Loan
A loan where, for a set period, your repayments cover only the interest - not the loan itself. Repayments are lower during that period, which helps cash flow, but the balance doesn't shrink. Common on investment loans, and worth discussing with your broker and accountant before choosing.
Principal and Interest (P&I)
The standard repayment type: each repayment covers the interest plus a slice of the loan itself (the principal), so the balance falls over time. Higher repayments than interest-only, but you're steadily building equity with every payment.
Rental Yield
The annual rent as a percentage of the property's value - a quick way to compare how hard different properties work for their price. A $500,000 property renting for $500 a week earns $26,000 a year, which is a 5.2% gross yield. "Gross" ignores costs; "net" yield counts them.
Capital Growth
The increase in a property's value over time. Growth and yield tend to pull in opposite directions - high-growth areas often rent for comparatively less, and high-yield areas often grow more slowly. Balancing the two is a core part of choosing the right investment property.
Capital Gains
The profit you make when you sell an asset for more than it cost you. For property held in your own name, capital gains are taxed in the year you sell - and individuals who hold for more than 12 months generally receive a 50% discount on the taxable gain. General information only - your accountant will confirm how it applies to you.
Negative Gearing
When the costs of holding an investment property (loan interest, management, insurance, and so on) add up to more than the rent it earns. The shortfall generally reduces your taxable income. It's a trade-off - less cash flow today in exchange for expected growth. More detail in our guide to investment property tax benefits.
Positive Gearing
The opposite: the rent covers all the costs with money left over. The surplus is income, so you pay tax on it - but the property pays its own way. Neither gearing type is automatically "better"; it depends on your income, buffer, and goals.
Cash Flow
The money moving in and out of your investment each month - rent in, repayments and costs out. Positive cash flow means money left over; negative cash flow means you top it up from your income. Knowing your cash flow number before you buy is what keeps an investment comfortable instead of stressful.
Depreciation
A "paper" deduction for the wear and tear on a building and its fixtures - carpets, appliances, hot water systems. You claim it each year without spending anything that year. Newer properties generally carry larger depreciation claims.
Buyer's Agent
A licensed professional who works for the buyer - not the seller. A buyer's agent researches markets, shortlists properties, negotiates the price, and manages the purchase on your behalf. It's what Delphi & Co does, step by step, through The Delphi Wealth Method.
Conveyancing
The legal process of transferring property ownership from the seller to you. A conveyancer or solicitor reviews the contract, runs the searches, and handles the paperwork through to settlement. Not the place to cut corners.
Stamp Duty (Transfer Duty)
A state government tax paid when you buy a property. The amount varies by state and by price, and it's one of the biggest upfront costs of a purchase - so it needs to be in your numbers from day one. It's not deductible along the way, but it forms part of your cost base when you eventually sell.
Vacancy Rate
The percentage of rental properties in an area sitting empty. A low vacancy rate means tenants are competing for properties - good for landlords. A high vacancy rate means properties are competing for tenants. One of the simplest health checks on a suburb's rental market.
Portfolio
Your collection of investment properties. Most people start with one - and the equity that first property builds can, in time, help fund the next. That compounding step-by-step approach is covered in our guide to building a property portfolio.
Terms You'll Hear From Your Accountant
When you sit down with your accountant (or hop on a call), they'll throw around a few terms that are specific to the financial and tax side of things. Here's what they actually mean.
Depreciation Schedule
A report prepared by a quantity surveyor listing everything in your investment property that can be claimed for depreciation, year by year, for decades. You pay for it once, and your accountant uses it at every tax return afterwards.
Cost Base
Everything the property really cost you - the purchase price plus stamp duty, legal fees, and certain other costs. When you sell, your capital gain is worked out against the cost base, not just the purchase price. Keeping good records from day one pays off here.
CGT Discount
Capital gains tax concession for patient investors: individuals who hold an asset for more than 12 months before selling generally have only half the gain taxed. The ATO's rental property pages cover the detail - and your accountant will confirm how it applies to you.
Land Tax
An annual state tax on the land value of investment properties you own (your own home is generally exempt). Each state has its own thresholds and rates, which is one reason some investors spread purchases across states. Your accountant can model what it means for you.
Marginal Tax Rate
The rate of tax you pay on the top slice of your income. It matters for property because rental profits are taxed at it, and deductions save tax at it. When your accountant says "at your marginal rate", this is what they mean.
Terms You'll Hear From Your Broker
If you're borrowing to buy an investment property, your mortgage broker will use a few terms of their own. Here's the translation. For what lenders actually look at, check out our guide on how much you can borrow.
Pre-approval
A conditional agreement from a lender saying they're willing to lend you a certain amount, subject to finding a suitable property and final checks. Getting pre-approval before you start property hunting saves time and heartache.
Serviceability
The lender's assessment of whether you can afford the loan repayments. They look at your income (including a portion of the expected rent) versus your expenses and existing commitments - and they test it at a higher interest rate than today's, as a safety margin. If the numbers stack up, you're "serviceable".
Comparison Rate
An interest rate that bundles in most of a loan's fees, so you can compare loans fairly. A loan with a low headline rate and high fees can cost more than one with a slightly higher rate and no fees - the comparison rate exposes that.
LMI (Lenders Mortgage Insurance)
A one-off insurance premium lenders charge when you borrow more than about 80% of a property's value. It protects the lender, not you. Using your home equity for the deposit is one common way investors keep the LVR at or under 80% and avoid paying it.
Settlement
The day the property officially becomes yours. The money changes hands, the title transfers into your name, and you get the keys. Your conveyancer and lender coordinate it - your job is mostly done by then.
Cash Buffer
The amount of cash you keep in reserve after purchasing - often parked in an offset account. It covers repayments, maintenance, vacancies, and any unexpected costs. Most brokers and advisers recommend keeping enough to cover at least 6 months of expenses. A healthy buffer is what lets you sleep at night.
You Don't Need to Memorise This
Seriously. Bookmark this page and come back when you need it. The whole point of working with Delphi & Co is that we handle the complexity so you don't have to. We speak plain English because we believe clarity creates confidence - and confident people make better decisions.
If you're just getting started, The Delphi Wealth Method walks through the whole journey step by step. And if you want to see whether property investing could work for your situation, the Delphi Scorecard takes under 5 minutes and gives you a clear picture.
As Adel says: "If your money person can't explain it in 60 seconds, get a new one."
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General information only. Not personal financial advice.