Property Investment Terms Explained for First-Time Investors

Rental Yield

Rental yield measures how much income an investment property generates compared to its purchase price.

It’s usually shown as a percentage and helps investors understand the cash flow potential of a property.

In simple terms:
Rental yield shows how hard your property is working for you in terms of rental income.

For example:

• A $500,000 property earning $500 per week in rent has a higher yield than a similar-priced property earning $400 per week.
• Higher yield can help offset holding costs like interest, rates, and maintenance.
• Rental Yield Formula: (Annual Rental Income / Property Value) x 100

At Search Property, we focus on properties that balance strong rental yields with long-term capital growth, rather than chasing one at the expense of the other.

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Lenders Mortgage Insurance (LMI)

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Lenders Mortgage Insurance (LMI) is a one-off fee charged by the bank when you borrow more than 80% of a property’s value.

Important to know:

• LMI protects the lender if you can’t repay your home loan. 
• It’s usually added to your loan if you have a smaller deposit.
• It’s not always a bad thing.

In some cases, paying LMI can allow you to enter the market sooner, rather than waiting years to save a larger deposit while prices continue to rise.

The key is understanding when LMI makes strategic sense, and when it doesn’t.

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Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is the tax you may pay on the profit when you sell an investment property. 

The “gain” is the difference between:

• What you paid for the property (plus eligible costs), and
• What you sell it for.

Good news for long-term investors:
If you hold an investment property for more than 12 months, you may be eligible for a 50% CGT discount, depending on your circumstances.

CGT shouldn’t stop you from investing, but it should be factored into your long-term strategy and exit planning.

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Negative Gearing

Negative gearing occurs when the costs of owning a property (loan interest, expenses, maintenance) are higher than the rental income it produces.

This means:

• You’re topping up the property out of your own pocket, and
• You may be able to claim the loss against your taxable income.

What many people miss:
Negative gearing is not a strategy on its own. It’s a tax outcome.

The real question is whether the property:

• Fits your borrowing capacity,
• Supports your long-term growth goals, and
• Can transition to neutral or positive cash flow over time.

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Stamp Duty

Stamp duty is a government tax paid when purchasing property.

The amount depends on:

• The purchase price,
• The state or territory, and
• Whether you’re an owner-occupier or investor.

Stamp duty is a significant upfront cost and can materially impact your buying power, especially if you’re purchasing in higher-priced markets.

This is why many investors look beyond their home city and into markets where:

• Entry prices are lower, and
• Stamp duty doesn’t eat into their strategy.

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Ready to Build a Smarter Property Plan?

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Understanding property terms is one thing, knowing how to apply them strategically is another.If you want clarity around strategy, structure, and execution, the right guidance can make the difference between owning one property and building real momentum. 

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At Search Property, we help Australians create data-driven property investment strategies aligned with long-term wealth goals. Book a FREE investment assessment with Search Property. We’ll discuss your goals and position, and help you build a clear plan to move forward with confidence. 

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