Are you new to property investing and feeling overwhelmed by all the jargon? Whether you’re buying your first rental property or just exploring the real estate market, understanding key property investment terms is crucial for making informed decisions and avoiding costly mistakes.
In this guide, we’ve compiled the most essential property investment definitions to help first-time investors in New Zealand build their knowledge and confidence. From acquisition costs and capital gains to LVR, interest deductibility, and everything in between, you’ll find clear, concise explanations tailored to the NZ property landscape.
Read on to demystify the language of property investing and take your first step toward building a successful investment portfolio.
Amortisation
The process of gradually repaying the principal of your mortgage over time through scheduled payments.
Appreciation
An increase in a property’s value over time, driven by market trends, demand, location, or property improvements.
Body Corporate
The group responsible for managing shared areas in unit-title properties like apartments. Fees apply and cover maintenance and administration.
Break Fee
A penalty charged by lenders if you exit or refinance a fixed-rate mortgage before the agreed term ends.
Building Report
A pre-purchase inspection by a qualified builder that identifies structural or maintenance issues with a property.
Buyer’s Agent
An agent who represents the buyer’s interests in a property purchase. Less common in NZ, but can provide negotiation support.
Capital Gain
The profit made from selling a property for more than you paid. May be taxed under the Bright-line rule if sold within the taxable period.
Capital Growth
The increase in a property’s market value over time—one of the key goals in long-term property investment.
Cash Flow
The difference between your rental income and expenses (mortgage, rates, insurance, etc.). Positive cash flow means the property earns money monthly.
Chattels
Moveable items in a property like whiteware, curtains, or heat pumps. Often depreciable for tax purposes.
Conditional Offer
An offer to purchase that depends on specific conditions, such as finance approval or building inspection.
Cross Lease
A shared land ownership arrangement where lease agreements are made between owners. May involve restrictions on alterations.
Depreciation
The decline in value of chattels (but not buildings) over time. Investors can claim depreciation as a tax deduction.
Diversification
The strategy of spreading your investments across multiple property types or regions to minimise risk.
Due Diligence
The research and checks you perform before buying. Includes: LIM reports, title searches, valuations, and building inspections.
Equity
The difference between a property’s market value and the amount you owe on the mortgage. Can be used to leverage further investment.
Fixed Interest Rate
A loan where the interest rate remains the same for a set term, offering repayment certainty.
Floating Interest Rate
A loan with a variable interest rate that can change with market conditions. Offers more flexibility for repayments.
Freehold
The most common type of ownership in NZ. You own both the land and the building outright.
Gross Yield
Calculated as annual rent divided by purchase price, shown as a percentage. Doesn’t account for expenses.
Guarantor
Someone (usually a family member) who agrees to take over loan repayments if the borrower defaults.
Interest-Only Loan
A loan where only interest is paid for a set period, keeping repayments low while the loan principal remains the same.
Investment Property
A property purchased to generate income or capital gains, not for personal use or occupation.
LIM Report (Land Information Memorandum)
A report from the council detailing zoning, consents, hazards, and the history of a property.
LVR (Loan-to-Value Ratio)
The percentage of the property value that’s being borrowed. Most NZ investors need a 30% deposit (70% LVR).
Leasehold
You own the building but not the land, which is leased from another party. Leasehold properties involve ground rent payments.
Leveraging
Using equity in an existing property to finance the purchase of another property. A common strategy to grow your portfolio.
Look-Through Company (LTC)
A company structure that allows income and losses to be passed through to shareholders for tax purposes.
Maintenance Reserve
Funds are set aside to cover property repairs or unexpected expenses. Helps maintain positive cash flow and protects against surprises.
Market Rent
The typical rent a property commands in the local area. Used for pricing and assessing loan serviceability.
Mortgage Broker
An adviser who compares loan products from multiple lenders and helps you secure a mortgage. Usually free for borrowers.
Net Yield
A more accurate return calculation that subtracts expenses from rental income before dividing by purchase price.
Negative Gearing
When your property costs more to run than it earns in rent. Strategic if you’re expecting strong capital growth.
New Build
A newly constructed, never-occupied property. Often creates lending advantages, such as lower required deposits.
Non-Bank Lender
A lender that’s not a traditional bank. Often used by investors who don’t meet bank lending criteria.
Occupancy Rate
The percentage of the year a rental property is tenanted. A low rate means less rental income and higher risk.
Off-Market Property
A property that’s sold privately without public advertising. Often found through networks or direct negotiation.
Offset Account
A transaction account linked to your mortgage, where the balance offsets the amount on which interest is calculated.
Learn more about offset accounts here.
Passive Income
Ongoing income earned with little active effort—rental property is one of the most common passive income sources (with a property manager).
Portfolio
The total group of properties you own as an investor. Managing a portfolio requires strategic planning and financial oversight.
Positive Gearing
When your rental income exceeds all expenses and the property generates a profit each month.
Pre-Approval
A lender’s conditional commitment to lend a specified amount. Useful for knowing your budget and making stronger offers.
Principal and Interest Loan
A standard loan structure where each payment reduces both interest and the principal balance over time.
Property Manager
A professional who manages tenants, rent collection, maintenance, and legal compliance on behalf of the property owner.
Refinancing
Replacing your current mortgage with a new one—often used to access better rates or release equity for further investment.
Rent Appraisal
A rental valuation done by an agent or property manager, estimating the market rent. Often used for loan approval or budgeting.
Renovation ROI
Return on investment from improving a property, measured by the increase in rental income or resale value.
RV (Rateable Value)
The value assigned by the council for rates purposes. Not necessarily the same as market value.
Settlement Date
The date on which ownership officially transfers to the buyer, and payment of the purchase balance occurs.
Tenancy Agreement
A legal document outlining the terms and conditions between landlord and tenant.