Thirty terms that decide how far a property portfolio can go. Each one defined the way we would explain it across a table, not the way a product disclosure statement would.
The amount a lender will let you borrow, based on income, expenses, existing debts and their own policy. It is not one number: the same person can have capacity figures hundreds of thousands of dollars apart at different lenders. How you spend it across a portfolio matters as much as how big it is.
A lender's assessment of whether you can afford a loan's repayments after all your existing commitments. Every lender calculates it differently: how they treat rental income, self-employed income and existing debt varies widely, which is why lender selection is a structural decision, not a rate decision.
The margin lenders must add to your actual interest rate when testing affordability. APRA currently sets it at 3 percentage points, so a loan at 6.24% is assessed as if you were paying 9.24%. The buffer is the main reason your real capacity is smaller than online calculators suggest.
Your total debt divided by your gross annual income. A household earning $200,000 with $1,200,000 of debt has a DTI of 6. Many lenders apply extra scrutiny or caps above a DTI of 6, which makes the ratio a practical ceiling for aggressive portfolio builders.
Lenders never credit you with 100% of rental income. Most count 75% to 90% of it, and specialist assets like rooming houses can be shaded harder. Two lenders looking at the same rent can produce very different capacity figures, purely through shading policy.
Expenses in a business's financials that a lender agrees to add back to profit when assessing a self-employed applicant's income: depreciation, one-off costs, interest on debts being refinanced, sometimes voluntary super. Which add-backs a lender accepts can swing self-employed borrowing power dramatically. See PAYG vs self-employed serviceability.
The benchmark lenders use to estimate your minimum living expenses if your declared spending looks low. Assessment uses the higher of your declared expenses and HEM, so understating your spending rarely helps and overstating it directly cuts capacity.
The loan amount as a percentage of the property's value. An $800,000 loan on a $1,000,000 property is an 80% LVR. LVR drives pricing, LMI and lender appetite: 80% is the standard threshold below which most lenders relax, and specialist assets are usually capped lower.
The portion of your equity a lender will actually release, usually your property value multiplied by 80% (sometimes 90%) minus current debt. It is always less than the equity your loan statement implies, and it differs by lender and structure. See equity mapping.
Borrowing against equity in a property you already own, typically to fund the deposit on the next one. Done well, it sits as a separate loan split with funds in offset, keeping investment debt clean and traceable. Done badly, it tangles owner-occupied and investment borrowing together.
A one-off premium charged when you borrow above 80% LVR. It protects the lender, not you, and typically costs 1% to 4% of the loan. Sometimes paying LMI is strategically correct: it can preserve cash for the next purchase. It is a modelling decision, not a reflex to avoid.
One loan secured by more than one property, or one lender holding titles across your portfolio. It feels efficient and it is the single most common structural mistake we unwind: that lender now controls your equity, and every future move is measured against the whole tangle. See the silent capacity killer.
The opposite of cross-securing: each property secured by its own loan, ideally spread across lenders. Standalone structures keep equity portable, let you sell or refinance one asset without touching the others and preserve your ability to negotiate. The default setting of every well-built portfolio.
The lender's assessment of what a property is worth, which is often more conservative than the market price you could sell at. Valuations differ between lenders, so a refinance declined on valuation at one lender can proceed at another. Always contest with evidence, or move.
Repayments cover interest alone for a set period, usually one to five years. Rates run slightly higher and the principal does not reduce, but cash flow improves and, on investment debt, repayments stay fully deductible. Common on investment lending while owner-occupied debt is paid down first.
Repayments cover interest plus a portion of the loan itself, so the balance falls over the term. The default for owner-occupied debt, where reducing non-deductible borrowing fastest is almost always the right priority.
A transaction account linked to a loan. Every dollar in it reduces the balance interest is charged on, while staying available to spend. Offsets preserve the loan's original balance and purpose, which matters enormously for tax deductibility. Prefer offset over redraw for investment planning.
Access to extra repayments you have made on a loan. Unlike an offset, pulling money back out is new borrowing in the tax office's eyes, and its purpose determines deductibility. Redrawing from a home loan for personal spending, then trying to invest later, is how clean structures get contaminated.
One facility divided into portions with different settings: part fixed and part variable, or part owner-occupied P&I and part investment IO. Deliberate splits keep deductible and non-deductible debt separate and traceable, which is the foundation of strategies like debt recycling.
A legally required rate that bundles the advertised interest rate with most fees, calculated on a standardised $150,000 loan over 25 years. Useful for spotting fee-heavy products, less useful for large or complex lending where the standardised assumptions stop resembling your loan.
Replacing an existing loan with a new one, at the same lender or a different one. In portfolio building, refinancing is rarely about the rate alone: it is the tool for releasing equity, unwinding cross-securing and repositioning debt with the right lender before the next purchase.
A structure where a trustee holds property for beneficiaries and decides how income is distributed each year. Offers flexibility and asset protection, at the cost of harder serviceability assessment and, in some states, losing the land tax threshold. See trust vs personal name.
A trust where entitlements are fixed in proportion to units held, more like shareholding than a family trust's discretion. Common for unrelated parties investing together, and in certain SMSF strategies. Lender treatment sits between personal names and discretionary trusts.
A company acting as trustee of a trust, rather than individuals. Cleaner for lending, succession and liability: the company holds title, and changing directors is far simpler than changing named trustees on property titles. Most serious trust structures use one.
The land value below which a state charges no land tax. Thresholds and trust treatment differ by state: in Queensland individuals get a $600,000 threshold while trusts and companies get $350,000. Ownership structure decisions change the land tax bill every year, forever, so they belong in the plan early.
The only way an SMSF can borrow to buy property. The asset sits in a separate holding trust and, if the loan fails, the lender's recourse is limited to that single asset, not the rest of the fund. Fewer lenders, lower LVRs and strict rules. See SMSF property lending.
The trust that holds legal title to a property bought under an LRBA while the SMSF pays the loan and receives the benefit. It must be set up correctly and in the right order relative to the contract date. Errors here are expensive to unwind, which is why the accountant and solicitor belong in the sequence early.
A property rented by the room to multiple unrelated tenants, producing substantially higher yield than a standard house. Lenders treat rooming houses as specialist assets: fewer will fund them, LVRs run lower and rent is shaded harder, which is exactly why structure matters. See rooming houses as a portfolio asset.
Lending for projects rather than completed properties, drawn progressively against land, construction and completion stages. Assessed on the project's feasibility and exit (sell or refinance) as much as your income. See land, build, exit.
Contracts to sell completed dwellings signed before or during construction. Development lenders often require a level of presales as evidence the exit is real, and the amount required shifts with the credit cycle. Fewer required presales usually means paying more for the money.
Progressively converting non-deductible home debt into deductible investment debt: pay down the home loan, re-borrow the same amount as a clean investment split, invest it and repeat. Powerful over a decade, unforgiving of sloppy loan structure. See converting bad debt to good.
Equity created by improving a property rather than waiting for the market: renovating, subdividing or adding a second dwelling. A $450,000 build that adds $500,000 of value has manufactured equity the next purchase can draw on. See manufactured equity and dual occupancy.
Designing each purchase, loan and ownership decision around what comes next, so every settlement opens the following one instead of blocking it. The core discipline behind portfolios that scale past two or three properties. See the sequencing strategy.
The point where a lender declines the next purchase even though your portfolio is performing, because capacity was spent without a plan. Most investors hit it at property two or three. It is almost always built years earlier, one convenient decision at a time. See why investors stall after property two.
A 15-minute fit call with our team. No pitch. No obligation. A conversation about where you are and what the structural next step looks like.