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The Property Bible: The Glossary of Terms.

In New Zealand property, the person with the most vocabulary usually leaves the settlement meeting with the most money. This list covers the "Big Three": Lending, Tax, and Commercial.

1. The Gatekeepers (Lending & Banks)

  • DTI (Debt-to-Income): The 2026 lending ceiling. Banks generally cap your total debt at 6x your gross income for your own home, or 7x for investment property. If you earn $100k, you aren't getting a $1M loan anymore, no matter how good your "vibe" is.
  • LVR (Loan-to-Value Ratio): The percentage of the property’s value that is debt. An 80% LVR means you have a 20% deposit.
  • Servicing Test Rate: The "fake" interest rate the bank uses to see if you can afford a loan. Even if actual rates are 5.5%, the bank tests you at ~8.5% to ensure you won't collapse if rates rise.
  • Interest-Only (IO): A strategy where you only pay the interest and $0 of the principal. Great for cash flow on investments, but banks usually limit this to 5-year terms.

2. The Tax Shield (IRD Rules)

  • 100% Interest Deductibility: As of April 1, 2025, you can deduct every cent of mortgage interest from your rental income before paying tax. This effectively "subsidises" your mortgage through tax savings.
  • 2-Year Bright-line Rule: The "Capital Gains" clock. If you sell a residential investment property after holding it for more than 2 years, the profit is generally tax-free. (Note: This used to be 10 years—2026 is a flipper's paradise).
  • Ring-Fencing: A rule that prevents you from using "rental losses" to offset your 9-to-5 salary tax. Rental losses can only be used to offset future rental profits.
  • Chattels Depreciation: Dividing the "house" into the building (0% depreciation) and the "stuff" inside (carpets, blinds, heat pumps). You can claim the "wear and tear" on these items as a tax deduction.

3. The Money Makers (Commercial & Strategy)

  • Cap Rate (Capitalisation Rate): The yield expected by the market.
    • Formula: Value = Net Income​ / Cap Rate * 100
    • Pro Tip: In a 6.5% market, every $1 of extra rent you find adds ~$15 to the building's value.
  • OPEX (Operating Expenses): In commercial deals, the tenant usually pays the insurance, rates, and maintenance on top of the rent. This is called a "Net Lease."
  • WALT (Weighted Average Lease Term): How much time is left on your leases across the building. A high WALT (e.g., 8 years) makes the bank feel safe and the building worth more.
  • And/Or Nominee: Three little words you add to a contract that allow you to "sell" the contract to someone else before you even settle. It’s the key to Wholesaling.
  • Due Diligence (DD): Your "Get Out of Jail Free" period. Typically 10–15 working days where you check the title, the structure, and the "LIM" (Land Information Memorandum).