Savings/Investment Part 5 Flashcards
What is property investment?
The outlay of money in property for income or profit
What are the advantages of investing in property?
It is usually less volatile than shares, is a safe haven when other assets are declining, can generate capital growth and rental income
What are the risks of property investment?
Property prices can fluctuate, good tenants can be hard to find and the yield may be less than if you had invested in something else
What are the costs of property investment?
Maintenance costs if property, cost of property itself and potential costs incurred by having a bad tenant
What are mortgages?
Loans which use property as security
What are the 3 common types of mortgages?
Interest only, principle and interest and reverse
What are interest only mortgages?
When the borrower only pays the interest on the loan until the loan is to be repaid, at which point the full amount is repaid
For whom is an interest only mortgage useful for?
Investors who want to borrow as much as possible to increased their leveraged gain and cannot afford to pay the principle back until a later date
What does a principle and interest mortgage require?
A borrower to repay the amount borrowed together with interest through a series of regular investments
What are reverse mortgages?
Instead of borrowing money to buy a home, borrowers use the assets they already own to secure borrowing to spend elsewhere
For whom are reverse mortgages useful for?
People who are asset rich but income poor
When investing in the share market what must you be?
18 years of age and of Australian residence
What is a share?
Part-ownership of a business, issued by a company to raise money for future development or to sell off part of the company
What happens when you buy shares in a company?
You become a part-owner of the company and receive benefits from their profits
What is settlement?
The transfer of the title for shares, occurring 3 days following the trade date
