Understanding Property Investment Abbreviations

I thought you might like to see some of the abbreviations for property investment so that when you are reading through the various articles you will not be left wondering what they are referring to:

AAPR – annualised average percentage rate, or often referred to the comparison rate.  This figure includes all costs associated with the loan and is used to compare different loan products.

ABCB – Australian Building Codes Board

APR – annual percentage rate – the annual percentage rate being charged by a lending institution.

ATO – Australian Tax Office

BCA – Building Code of Australia – sets minimum community standards as regards safety, health and amenity in buildings.

CAP RATE – capitalisation rate – the assumed rental yield from a property – it is calculated by dividing the annual rental by the price of the property.

CGT – capital gains tax – the tax paid on an investment property if a profit has been made.

CMA – comparative market analysis – a report showing prices and dates of similar properties in the local area, usually 3 recently sold, 3 on the market and 3 not sold and taken off the market

CPI – Consumer Price Index as assessed by the government.

DEPN – depreciation – the value at which the ATO allows depreciation on certain assets.

GST – Goods and Services Tax – this can relate to a property investor so check with your accountant

LMI – lenders mortgage insurance – an insurance which is usually required by a lender when more than 80% of the property’s value is being borrowed.  It provides insurance to the lender should the borrower default on the loan.

LOC – line of credit – a credit facility given by a financial institution allowing a borrower to draw down on a loan and only pay interest on the amount in credit.

LVR – loan-to-value ratio – to calculate this value, divide the loan value by the value of the property then multiply by 100 to get a percentage.  Lending institutions use this method to calculate whether a borrower can afford the loan.

O&A – offer and acceptance for – when an offer is made by the buyer one of these forms is used and seller signs it to accept the offer.

PPOR or PPR – principal place of residence

POA – price on application

ROI – return on investment – usually referred to the percentage return on your investment.

REIA – Real Estate Institute of Australia – each state has its own institute e.g. REIQ, REIV, REINSW,REIWA

RTA – Residential Tenancies Act – each state has its own body dealing with disputes.

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