BEGINNER S GUIDE TO INVESTING

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1 BEGINNER S GUIDE TO INVESTING Buying an investment property can be an overwhelming decision. To help you navigate the investment process, this guide has been developed to provide you with everything you need when starting out in property investment. With the help of various tips and checklists, this useful guide will help you to secure the right investment property. The following guide is an overview of the investment process for beginners. Each state will vary with rules and regulations. Your relevant state authority should be contacted to obtain the most accurate information.

2 Beginner s Guide to Investing Contents Why Invest in Property? Table 1: Pros and Cons of Investing in Property 1 Cost of Investing Initial costs 2 Table 2: The Initial Cost of Investing in Property 2 Ongoing Costs 3 Table 3: The Ongoing Cost of Investing in Property 3 What makes a good Investment Property? The Right Stage of the Property Cycle 5 The Right Location 5 The Right Property 5 The Right Return 5 Understanding the Property Cycle When Buying The Property Cycle 7 Property Cycle Phases 8 The Boom Phase 8 The Slump Phase 8 The Stabilisation Phase 8 The Upturn Phase 8 Tax for Property Investors The Tax Incurred by an Investor 9 The Deductions of an Investor 10 Acquisition and Maintenance Costs 10 Depreciation Allowances 11 Negative Gearing 11 Managing Your Investment Property Table 4: The Pros and Cons of Self Management vs. a Property Manager 12 Choosing a Property Manager 13 Questions To Ask When Interviewing a Property Manager 13 Fees 15 Table 5: Property Management Fees from State to State 15 Your Responsibilities as a Landlord Choosing a Tenant 16 Discrimination 16 Bond and Advance Rent 16 During Tenancy 17 Condition Report and Rental Guide 17 Rent and Bond 17 Rent Increases 17 Utilities 17 Maintenance and Repairs 17 Urgent Repairs 18 Non Urgent Repairs 18 Glossary Glossary 19

3 Understanding Why Invest Property? the costs involved when considering to rent or buy? Investing is a choice many people make at one point or another, in the hope of bringing wealth to their lives. Whilst there are many investment alternatives such as stocks, bonds and cash, property investment tends to be viewed as one of the safest and easiest options. However, property investment isn t for everyone. Thus if you are considering investing in property, it is important to weigh up the pros and cons. Table 1: Pros and Cons of Investing in Property Pros > > Capital Growth: The value of your property will grow over time and may be extremely beneficial financially if well chosen. Not only will you benefit from steady capital growth, but regular monthly rental returns. > > A safe investment: This is the only investment market which is not dominated by investors, hence creating a natural buffer in the market. It is also the most forgiving investment; if you purchase the worst house in the area, chances are that its value will still increase over time. > > Mitigate risk: You can insure your asset against most risks; fire / damage / a tenant leaving, damaging your property or breaking the lease. > > Anyone can invest: You do not have to possess a vast amount of knowledge, as you may with stocks or opening up a business. > > Control: Unlike other investments, you are in full control of your property investment; you can make all the decisions and have control over all of your returns. > > Tax benefits: Although tax benefits should not be used as a decision-making factor, it can be a benefit of investing in property. If your property is negatively geared, it may provide tax benefits. Note: it is important to consult your financial advisor to seek advice. Cons > > Liquidity: Although you can sell your property if things get tough, the process is not as quick as it is to sell other investments such as shares. > > Hidden and ongoing costs: Along with the initial costs of investing in property (i.e. stamp duty, deposit, legal and conveyance fees), you will need to consider the ongoing hidden costs of property investment such as fitting out the property, maintenance and repairs, building and landlord insurance, land tax, water rates, council rates, etc. Other investments such as shares do not incur ongoing fees. > > Rent free periods: During the periods when you are unable to find a tenant and the property is vacant, you will need to cover the mortgage repayments. > > Bad tenants: Problematic tenants are every owner s nightmare. They can severely damage your property, refuse to make payments and sometimes even refuse to leave the property. Some disputes can take months to resolve and become very stressful, especially if there is an emotional attachment to the property. > > Other costs: Although negative gearing may offer tax deductions, you will need to consider and budget for the shortfall between repayments and rental income as well as the cost to cover repayments when the property is vacant. pg 1

4 Understanding Cost of Investingthe costs involved when considering to rent or buy? An investment property has many benefits and if chosen carefully can provide solid financial returns. However, it can also be an expensive asset to acquire and maintain. There are many upfront and ongoing costs which need to be taken into account when taking the plunge. Initial Costs The following are costs which you will incur when the purchase is first made. Table 2: The Initial Cost of Investing in Property Expense Frequency Annual amount Deposit Once off payment INSERT The deposit needed to purchase a home is 10% of the asking price. However, if you borrow in excess of 80% of the property value, you will be required to pay mortgage insurance. Loan Establishment Fees Once off payment INSERT Some financial institutions will charge an establishment fee to cover the set up costs for your loan. Consult your financial institution to determine establishment fees. Mortgage Insurance Once off payment INSERT If your deposit is less than 20 percent of the value of the property, the lender may require you to pay mortgage insurance. Consult your financial institution to determine likely costs to insure your loan. Connections Once off payment INSERT Stamp duty Once off payment INSERT Legals Once off payment INSERT The cost of the connections for all the utilities and services you will need to have installed in preparation for the tenatns who will be occupying your property. Stamp duty costs will differ from state to state and will depend on the purchase price of the property. Stamp duty for an investment property is usually higher than a principal home. Refer to the following link to calculate costs: This cost covers the legal transfer of ownership. This is usually conducted by a solicitor or conveyancer. It may cost approximately $600-$800. pg 2

5 Understanding Cost of Investingthe costs involved when considering to rent or buy? Ongoing Costs Estimating ongoing costs can be a difficult task as they may vary from month to month and year to year. It is important to allow for the following costs you may incur as well as any extras which may arise. Table 3: The Ongoing Cost of Investing in Property Expense Once Off / Ongoing Amount Notes Insurance (Building & Landlord) Annual payment INSERT Building and landlord insurance will not only protect you from unforeseen building repairs (from fires or flooding), but also common tenant problems i.e. damage, tenant refusing to pay rent, leaving the property prior to the agreement s finishing, etc. Yearly Mortgage Fees Annual payment INSERT Your loan may be subject to a yearly loan account fee. It is important to consult your financial institution to determine if this is applicable. Land Tax Annual payment INSERT This cost is the annual tax levied on the owners of land. Land tax may be exempt in certain cases, however when purchasing a property as an investment you will be liable. Land tax is levied by states and territories. For more information please contact your relevant state authority. Council Rates / Government Taxes Annual payment INSERT In most instances council rates and government taxes will be the responsibility of the landlord. These rates will vary from state to state. Contact your state authority for more information. pg 3

6 Understanding Cost of Investingthe costs involved when considering to rent or buy? Body Corporate Fees Quarterly payment INSERT If your property resides on a shared block (e.g. is a townhouse, unit or flat), it is likely to incur owner s corporation fees. These fees cover maintenance of common areas as well as building insurance. The fees will depend on the condition of the property, its features and the area. Mortgage Repayments Monthly payment INSERT Although the rental payments you receive may cover most of your monthly mortgage fees, you may need to contribute and cover the shortfall. You will also need to keep up with the interest costs on the borrowings of your property and consider the impact of rate rises. Utilities Monthly payment INSERT You will also be responsible for the cost of any services which do not have separate metering devices like water, as well as the annual sewerage charges. Property Management Monthly payment INSERT If you have decided on seeking an expert to manage your property, their commission or fees will need to be considered. These fees may vary from state to state. For more information on the fees of a property manager, please refer to Managing Your Investment, page 12 of this guide. Repairs Ongoing - varies INSERT As the owner, you will need to maintain the property. Maintenance of a property can be partly tax deductable, however, it is important to double check what you can and cannot claim. pg 4

7 What Makes a Good Investment Property? A well chosen property is likely to deliver greater return in the future; not only in the form of capital growth but also in the form of rental returns. In order to maximise investment return, here are some key considerations to make: The Right Stage of the Property Cycle The property market moves in cycles. Property values may rise due to strong market growth, remain steady or even decline during certain phases of the cycle. Thus, as an investor it is important to know where the market is within the cycle to ensure you secure your property at the right price. For more information on the property cycle, refer to Understanding the Property Cycle When Buying, page 7 of this guide. The Right Location Location is integral to acquiring a good investment property. If the location is chosen correctly, the chance of gaining higher returns from your investment is far greater than if the location is not desirable and suitable for those looking to live close to amenities. Factors to consider are: > > Close proximity to certain amenities increases the desirability and value of a location and property; these include: Schools Public transportation Public facilities (post office, libraries, parks, medical centres, etc.) Shops and markets Lifestyle activities (restaurants, café strips, beach, etc.) Therefore, it is important to consider proximity to these when buying your investment property. > > When selecting an area to purchase a property in, try to avoid those that are likely to be dependent on a sole industry i.e. manufacturing. Although it can be beneficial when the industry is doing well, if it falls, your property s value may decline as a result. > > Some of the best places to buy are those experiencing population growth. As population grows, infrastructure improves and the desirability of an area increases. > > Living within close proximity to a major city (i.e. 10 kilometres) is always highly sought after. Whilst many of these suburbs attract higher prices, look for emerging suburbs which may have strong growth potential. The Right Property When searching for an investment property, you should aim to secure one which will be in continuous demand by tenants, as well as future home buyers. One factor you should consider is appropriateness of the property for the average age of residents in the area. It is therefore important to do some research to discover the demographics of your area of choice and determine what is important to this demographic. For example, if you are buying in an area with an older community, do not purchase a property with a staircase or an inconvenient layout. pg 5

8 What Makes a Good Investment Property? The Right Return Many property investors make the crucial mistake of choosing a property based on emotion, rather than finances and logic. A bad purchase may result in capital growth below the market average or rental income which does not come close to covering the monthly costs to maintain the property. It is therefore vital to do your research to establish your strategy before making a purchase. Researching the Market Over recent years a number of web sites have been established to enable consumers to access current sales results and historical sales data. This information will assist you to gain a good grasp of current market trends and historical growth patterns. Some of them include; > > PropertyDATA.com.au PropertyDATA.com.au contains data collected by the real estate institutes. The site will allow you to access the same comprehensive, accurate and up to date property sales information relied upon by estate agents, valuers and Australia s major banks. The site provides free as well as paid property reports, median prices, capital growth figures and suburb profile information. > > Residex Residex provides consumers with the ability to purchase information on all areas of the real estate market, such as analysis of market movements, price estimation, historical growth data and more. > > Real Estate Institutes There are real estate institutes across each state of Australia which act as the industry body in that specific state. The institutes amongst other things publish market commentary as well as median prices and other market data. pg 6

9 Understanding the Property Cycle When Buying The Property Cycle The property market moves in cycles. Property values may rise due to strong market growth, remain steady or even decline during certain phases of the cycle. Thus, as an investor it is important to know where the market is within the cycle to ensure you secure your property at the right price. Upturn PRICE TIME Upturn / Boom Downturn / Stagnation Equilibrium Price Actual Price Upturn Source: What Every Property Investor Needs to Know About Finance Tax and the Law, by Michael Yardney. As is depicted in the above graph, at different stages of the cycle, property values may increase, remain steady or decrease, however ultimately, the value of property increases over time. pg 7

10 Understanding the Property Cycle When Buying Property Cycle Phases At different stages of the property cycle, property values will exceed the long term trend (i.e. in boom times) and at other stages will fall short of the long term trend (i.e. property slumps). This is because the property cycle passes through four phases: The Boom Phase The boom phase tends to be the shortest in the cycle, during which property prices increase at a rapid rate. This phase generally begins slowly as investors recognise that property returns such as rental payments and property prices are increasing. As a result of the boom, properties often sell for more than their asking price, as buyers continue to compete with each other and vendors continue to push up asking prices. As the boom continues, many try to get on board to make the most of the current stage of the cycle; new investors join the market and builders, developers and existing home owners flood the market with properties. This leads to excess supply, which eventually brings the boom phase to an end and creates the consequent phase. The Slump Phase The slump phase occurs as a result of an oversupply of property due to the activity of builders / developers and sellers in the boom phase. With more investment properties on the market, vacancy rates increase and rental returns begin to decrease. During the slump phase, property prices stop growing and in some cases, may even decline. During this stage, many new home buyers also find themselves in trouble as they struggle with repayments. This is because many buyers over commit themselves in the boom phase, by purchasing properties they could not afford and interest rate rises make it difficult for repayments to be made. Therefore, the only way to relieve this financial stress is to sell in most cases at depressed prices. The Stabilisation Phase The property market does not usually jump from a negative period to the next upturn. Generally, a short phase exists in which various economic factors catch up with each other and stabilisation in the market occurs. The Upturn Phase The upturn phase sees vacancy rates slowly fall, rents start to rise and property values start to increase creating investment opportunities. Property values generally start increasing in the inner suburbs, or those close to the beach first and then move out to the middle ring of suburbs and eventually to the outer suburbs. By the middle of the upturn phase, property is generally affordable and returns from property investment are favourable. Property values will generally slowly increase and peak in the boom phase of the cycle. The attractive market results in interest from investors and first home buyers, and pushes the market towards the next boom phase; therefore starting the cycle again. pg 8

11 Tax for Property Investors * *The following section should only be used as a guide. We recommend you contact your financial advisor for advice on matters related to your personal taxes. Property investment allows buyers to have the luxury of certain tax benefits; however as an investor you will also incur additional taxes. The following provides a breakdown of taxes related to property investment. Tax Incurred by an Investor There are several taxes that you will incur when acquiring and owning an investment property: > > Income Tax You will be required to pay tax on income (rent and any other money) which you receive from your property. This may be offset however, by interest repayments on your loan as well as other deductions (refer to page 10 for more information). > > Capital Gains Tax (CGT) Capital gains tax is required to be paid on any profit made from your investment property once sold. The applicable rate of CGT is the same as the income tax rate which you pay, however if you have owned the property for more than 12 months, you gain a 50 percent discount on the capital gain. > > Property Taxes Sometimes referred to as council rates, this local tax typically funds local government investment and expenditure, such as rubbish collection, parks and public facility maintenance and other community services. The frequency and amount of tax will depend on the local municipality and the market value of your property. > > Land Tax Land tax is imposed by all state and territory governments, excluding the Northern Territory. It is payable based on the combined unimproved value of the land you own and is calculated on what your land would be worth if it was vacant; therefore it does not include existing dwellings on the property. Land tax is payable on all property you own, except your principal place of residence. The amount of this annual payment will vary by locality. Contact your relevant state authority for more information. pg 9

12 Tax for Property Investors * The Deductions of an Investor As an investor, there are three categories of expenses which you have the luxury of deducting from your tax: 1. Acquisition and Maintenance Costs You can offset expenses relating to your investment property against rental income; whether it was negatively geared or not. Some expenses which can be claimed are: Advertising costs to find tenants Bank fees and charges on your loan accounts Borrowing expenses Body corporate fees Cleaning costs Council rates Electricity and gas not paid by the tenant Insurance building, landlord, etc. Interest on your investment loans Land tax Legal expenses Property manager fees and commissions Surveyors fees Repairs and maintenance Stationery and postage expenses Investment related telephone bills Tax-related expenses Travel and car expenses for rent collection or inspections Costs incurred for the inspection or maintenance of your property Water charges. pg 10

13 Tax for Property Investors * 2. Depreciation Allowances All landlords who own an investment property are eligible to claim depreciation on newly purchased items. You can deduct depreciation on fixtures and fittings in the property, such as: Appliances Blinds Carpets Furniture Hot water system. 3. Negative Gearing Negative gearing occurs when the annual cost of your investment is greater than the return which you are receiving. In simple terms, when the ongoing costs such as maintenance and loan repayments are greater than rental income, then the property is negatively geared. If you are negatively geared, the government allows the loss on your property to be deducted from your gross income, creating a reduction in your tax liability. Top Tip: Do not be fooled. Although you will pay less tax, this is still a loss only slightly smaller, which in time will hopefully be made up for due to the property s capital growth. The ideal outcome is to have a positive cash flow or a low level of negative gearing. pg 11

14 Managing Your Investment Once you have purchased an investment property, you need to consider how you will manage it. Property management is a big responsibility as tasks such as finding tenants, chasing rental payments and coordinating maintenance can be time consuming. When managing your investment property, there are two options to be considered; self management or hiring a property manager to do it for you. It is important to weigh up the facts and consider the pros and cons of each option before making a decision. Table 4: The Pros and Cons of Self Management vs. a Property Manager Pros Property Manager Time: A property manager will take care of all time consuming tasks involved in managing your investment. Once a property has been leased, there is little more you need to do; they will take care of the rest. Emotional attachment: You will remain emotionally detached from the property when difficult matters need to be dealt with such as damage to your property, difficult tenants, etc. Industry knowledge: A property manager is an expert in all areas of property management. They can advise you on the optimal return for your property based on current market conditions. Tradesmen experience: As they manage a range of properties, they will have access to reputable trades people to perform maintenance on your behalf. Personal Management Agent fees: You will save on property management fees. Management: You will manage the property better than anyone else as you will be emotionally attached to the investment you have made. Top priority: As it is your investment, it will be your top priority to ensure it is tenanted, whereas a property manager may have many properties to manage, meaning yours may not be a top priority. pg 12

15 Managing Your Investment Cons Agent fees: You will have to pay the agent who is representing you and your property an ongoing commission / fee. Management: A property manager may not manage your property like you would. Time: Self management of an investment property can be very time consuming and stressful due to ongoing management tasks i.e. chasing rent payments, organising maintenance and inspections, etc. Emotional attachment: You may become too emotionally attached to the property when dealing with problematic tenants. Industry knowledge: You will not have up-to-date, vital information that an agent may have such as information on the current market, a register of available tenants, tenant history, etc. Marketing: You will not have access to all of the tools and websites needed to effectively market your property. Agents have access to websites that are not available to the Self Management market. This may impact on the rental return you can gain on your property. Choosing a Property Manager A property manager can play a vital role in the rental process of an investment property. The property manager will seek to maximise weekly rental income and source high quality tenants who will best take care of your asset. If you have decided to have a property manager represent you and your property, it is crucial to choose wisely. Once you have shortlisted a few potential property managers, it is important to meet with them individually to discuss the possible rental of your property. Questions To Ask When Interviewing a Property Manager 1. Does your agency have a dedicated property management department? Some agencies will view the task of property management as less important than selling and will therefore leave this task up to the front desk staff or receptionists.. Discover if the agency is experienced in the area of property management and has dedicated staff to effectively manage your property. 2. Is a director/owner of the agency overseeing the property management department? How focused is the agency on property management? The more important property management is to an agency, the more likely they are to effectively manage your asset. 3. How many years of experience do you have in property management? Experienced property managers will be able to attract the best tenants to look after your property and deal with those that become difficult. pg 13

16 Managing Your Investment 4. Can you provide me with a written comparison on rental values in the market? An experienced and knowledgeable agent will be able to benchmark comparable rental properties on the market and advise you of the optimal rental return you should receive from your property. 5. What is your process for reviewing potential tenants? How do they determine whether the tenant is suitable for a property? Do they conduct police checks, or checks regarding their past rental history, current employment, etc? 6. How many properties are you managing at the moment? Are they representing many other people, hence being reputable and successful? Bigger however is not always better, it is also important to establish if you will be a priority and get the service and attention required during the property management process. 7. Will you go to court to represent me if needed? In the case that you experience difficult tenants, you may need to go to court to resolve certain issues about the bond or other matters. The property manager you decide on will need to be experienced and willing to support you in these times. 8. Will you advise me of any maintenance and repairs that need to be made to the property? In particular when non urgent repairs need to be made, will you seek approval before getting items repaired? 9. What are your fees? Enquire about management fees as well as any other costs a property manager may charge. Typical fees you may incur include those related to sourcing tenants, ongoing management of property and monthly statement fees. 10. Can I please see some references or contact details of the landlords using your property management services? What level of service was provided to past clients? Did they take care of the landlord and follow through on all which was promised? pg 14

17 Managing Your Investment Fees If you have chosen for your property to be managed via an agent, it is important to understand the fees and costs that are associated with property management. Generally, this monthly fee covers the continual task of property management tasks such as: inspections, rent collection, etc. In some cases, agents may charge additional fees to cover the cost of finding a tenant. Property management fees will vary from state to state, as outlined below. Table 5: Property Management Fees from State to State State or Territory Information Fee Victoria (VIC), New South Wales (NSW), South Australia (SA), Australian Capital Territory (ACT) Queensland (QLD) Tasmania (TAS) Northern Territory (NT) Western Australia (WA) A majority of the agreements between the Agency and Landlord have a fixed percentage rate on all rent received. The percentage varies and is negotiable between the Agency and Landlord. The Property Agents and Motor Dealers Act (PAMD) outlines regulations which govern property management fees and commission. The Real Estate Institute of Tasmania (REIT) outlines a commission rate which agents should charge for property management. However these rates are only a guide and are negotiable. The system in the Northern Territory is deregulated, therefore there are no fixed fees. They are negotiable between the Agency and Landlord. Property management fees in WA are deregulated and hence negotiated between the client and managing agency. All fees are negotiable.some agencies may seek an additional letting fee for each new tenancy as well as on charge costs related to advertising / marketing to find tenants. The PAMD governs fees and have set a 5% +GST cap on rental fees. There are also some restrictions on what can be charged as a letting commission (most commonly agents will charge an amount equivalent to one week s rent plus GST). Any other fees or charges are negotiable between the agent and the landlord. Property Management Fee Residential % Commercial % Car Parks % Letting Fee Less than 12 months - 6.4% of annual rent 12 months to 24 months - 7.7% Over 24 months - 9.3% Although negotiable, generally property management fees range between 8 10%. Some agencies may seek an additional letting fee for each new tenancy as well as on charge costs related to advertising / marketing to find tenants. Although negotiable, property management fees are generally around 8%. Additional fees may be required on top of the monthly fee. pg 15

18 Your Responsibilities as a Landlord At the beginning and during the residential tenancy, as the landlord you have various responsibilities which must be upheld. As a landlord it is important that you understand these as you are obligated to abide by state law. Choosing a Tenant Discrimination During the application process, you must not discriminate against any of the applicants based on certain characteristics, such as: > > Gender > > Age > > Race > > Religion > > Marital status > > Sexuality > > Having children > > Pregnancy > > Mental illness > > Disabilities Bond and Advance Rent It is recommended that all landlords acquire a bond from their new tenants. This security measure will be useful in instances where the tenant does not pay rent, damages the property or fails to keep it in a satisfactory condition. If so, you are then eligible to claim some or the entire bond once the tenancy is over. The landlord may make a claim on the bond for: > > Damage caused by the tenant or their visitors > > Cleaning expenses > > Abandonment of the premises by the tenant > > Landlord being forced to pay tenant s bills > > Loss of landlord s goods > > Rent not being paid At the start of a new lease, you are expected to provide a bond lodgement form to be filled out by both parties and are responsible to ensure that it is lodged with the relevant state authority within the correct time period. pg 16

19 Your Responsibilities as a Landlord During Tenancy Condition Report and Rental Guide Once the residential tenancy agreement has been established, a condition report must be completed by the estate agent / landlord and tenant. This report will, in detail, state the condition of the premises at the start of the tenancy, and any past damages. Having photographic evidence and the condition report is very important as it may be used as evidence if there is a disagreement regarding the bond claim in the future. The estate agent or landlord must also provide a rental guide relevant to their state, which will include all the tenant s rights and other information which may be needed during the tenancy. Rent and Bond As the landlord you have the right to request rent on a weekly, fortnightly or monthly basis. With both the bond and rental payments received, you should provide detailed and signed receipts stating the date, amount received, property address, name of tenant and duration for which it has been paid. Rent Increases The conditions of rental increases vary from state to state. For more information contact your relevant state authority. Utilities As the landlord, you are responsible for ensuring the property has all basic utilities installed. You are also responsible for the payment of rates and taxes, any services which do not have separate metering devices, annual supply charge for water and sewerage, body corporate fees and any other services they have agreed to finance. Maintenance and Repairs The main living areas must be kept in good condition and all the appliances need to be maintained. The condition expected will be dependent on how old the property is and how much the rent is. You are obliged to take care of anything that may need repairing on the property and must respond to any requests in a timely manner. pg 17

20 Your Responsibilities as a Landlord Urgent Repairs Urgent repairs should be dealt with without any delay, in order to continue providing the tenant with a secure and liveable environment. Urgent repairs are those which are needed in order to fix a serious problem or fault which may endanger the tenant or damage the property and other belongings, such as: > > Burst water service > > Blocked or broken lavatory system > > Serious roof leak > > Gas leak > > A dangerous electrical fault > > Flooding or serious flood damage > > Serious fire or storm damage > > Failure or breakdown of gas, electricity or water supply to premises > > Any other damage which results in the property being unsafe or not secure If they are not dealt with, the tenant has the right to organise a qualified professional to complete repairs, up to the amount specified in the tenancy agreement. You will then have to reimburse the tenant for the cost incurred. Non Urgent Repairs Non urgent repairs need to be resolved within a specified amount of time. This may vary from state to state therefore we recommend you to contact your relevant state authority to understand your obligation. pg 18

21 Glossary > > Agent (real estate): a licensed and fully trained individual who aids in the process of selling, buying and managing a property. > > Amenities: a desirable or useful feature or facility of a building or place. > > Capital Growth: an increase in the market price of an asset (in this case, a property). > > Conveyancer: a person or company licensed to conduct conveyancing business. This means any business where conveyancing work is undertaken for a fee or reward. > > Conveyancing: the legal process for the transfer of ownership of real estate. > > Depreciation: a reduction in the value of an asset with the passage of time, due in particular to wear and tear. > > Investor: an individual that makes an investment into one or more categories of assets (i.e. real estate currency, etc.) with the objective of making a profit. > > Landlord: an owner of a property which is rented or leased to an individual or business known as a tenant. > > Municipality: a city, town, or other district possessing corporate existence and usually its own local government. > > Negative gearing: occurs when the annual cost of your investment is greater than the return which you are receiving. > > Rent: a payment which is usually bound by a contract, made by a tenant at precise intervals in order to be able to occupy or use someone else s property. > > Stamp duty: a state tax, based on the sale price of a property, paid by the buyer when the property ownership is transferred. Each state and territory has a different set of rules and calculations. > > Capital Gains Tax (CGT): a tax payable on profit made on the sale (disposal) of a capital asset. > > Tenant: an individual who pays rent to the landlord and then receives the right to occupy/use their property. > > Utilities: basic services often regulated by the government, such as electricity, gas or water. > > Valuer: a valuer assesses the value of land, buildings, improvements and other factors that influence the current or past value of a property, a process that usually involves an external and internal inspection of the property. > > Yield: yield is a measure of the percentage of income return you get from an asset. This measure applies to a number of assets, such as shares and real estate. pg 19