Here’s a list of some of the most common terms you’ll need to know and why they matter.
There’s a lot of jargon in property investing — but once you know the basics, it’s much easier to feel confident when making decisions. Here’s a simple guide to some of the most common terms you’ll come across.
Bright-line Test
A New Zealand tax rule. If you sell a residential property within a set number of years after buying it, you may need to pay tax on the profit (capital gain).
Why it matters: It can affect the after-tax return you make on a sale — and could influence how long you hold a property.
Buy & Flip
An investment strategy where you buy a property, renovate it to add value, and then sell quickly for a profit.
Why it matters: Flipping can generate fast returns, but it comes with higher risks (like renovation blowouts or market dips) and may be taxed as income.
Buy & Hold
A strategy where you buy a property and keep it long-term, earning rental income and aiming for capital growth.
Why it matters: This is one of the most common strategies, balancing regular cashflow with potential long-term gains.
Capital Gains
The profit when a property’s value rises compared to what you paid.
Why it matters: Capital gains often make up the biggest share of long-term investment returns.
Cashflow
The money left over after rent minus expenses (mortgage, rates, insurance, maintenance, etc.).
Why it matters: Positive cashflow makes your investment more sustainable, while negative cashflow means you’ll need to top it up from other income.
Chattels
Movable items in a property, like curtains, appliances, or furniture in a furnished rental.
Why it matters: Chattels can be depreciated for tax purposes and may affect the value of a property when buying or selling.
Depreciation
The loss of value of items like carpets, appliances, or fittings over time.
Why it matters: Some depreciation may be tax deductible, reducing your taxable income.
Equity
The difference between your property’s value and what you still owe on the mortgage.
Why it matters: Growing equity lets you refinance or leverage into more property purchases.
Fixtures
Items permanently attached to the property, like heat pumps, kitchen units, or wardrobes.
Why it matters: Fixtures are part of the property’s value and can’t be claimed as separate chattels for tax.
Interest-only Loan
A loan where you pay just the interest, not the principal.
Why it matters: It can improve short-term cashflow, but you won’t reduce the loan balance over time.
Leverage
Using borrowed money (a mortgage) to buy a property.
Why it matters: Leverage magnifies returns if the property grows in value — but it also magnifies losses if values fall.
LVR (Loan-to-Value Ratio)
A Reserve Bank rule that limits how much you can borrow compared to a property’s value.
Why it matters: It affects how much deposit you need. For example, investors currently need a 30% deposit on existing homes, but new builds are exempt from this rule.
Negative Equity
When your mortgage is higher than the property’s current market value.
Why it matters: It can trap you in a loan or limit refinancing options if the market drops.
Negatively Geared
When your expenses are higher than your rental income.
Why it matters: It costs you money each month, but some investors accept this if they expect strong capital gains. It also means that you'll no or less tax to pay (for that one investment).
P&I (Principal & Interest loan)
Loan repayments that cover both the interest and part of the borrowed amount.
Why it matters: It means you pay off your loan within the loan term.
Interest-only loan
Loan repayments that only cover the interest, not the principal. Often used short-term by investors for cashflow reasons.
Why it matters: Your repayments will be less, so it can improve your cashflow. However it takes longer to pay off your loan and increases the total interest cost, so its usually only a short-term strategy, i.e 5 years.
Offset Mortgage
A loan linked to your savings account. Your savings balance reduces the interest charged on your mortgage.
Why it matters: It can save interest costs and give you more flexibility than making lump-sum repayments.
Positively Geared
When your rental income is higher than your expenses.
Why it matters: Provides regular extra income and makes it easier to cover costs or build a buffer for repairs and vacancies, but also means you'll pay tax on your income.
Refinancing
Replacing your current mortgage with a new one - often to get better terms, rates, free up equity, or switch banks. Sometimes you'll also get a cash contribution to switch banks.
Why it matters: Refinancing can unlock capital for new investments, or reduce borrowing costs.
Rental Yield
A percentage measure of how much rent a property earns compared to its value.
Why it matters: Helps you compare properties and see how much income return you’re getting on your investment.
Tax Deductible
Expenses that can be offset against your rental income, reducing the amount of tax you pay.
Why it matters: Deductions (like interest, insurance, and maintenance) can significantly improve the net return on your property.
Vacancy Rate
The percentage of time a rental property sits empty.
Why it matters: High vacancy rates reduce your rental income and overall yield, so location and tenant demand are critical.