Real estate investment is one of the popular choices in Pakistan. However, it is not easy, there are many things to know.
So you need to first understand all the terms that are closely related to this investment. It’ll be nice if there’s anything later.
Do you know the rental return from your REIT? What is meant by the solemn debt ratio (DSR)?
Don’t worry, we provide a complete guide to 50 wealth investment terms that you need to know!
1) Annual Return
Annual discharge is an extension term used to describe a year’s return period, using a standard return period.
It can be used to measure your average annual return, for example, over a three year period. It can also be used to understand the range of annual returns, based on actual returns over a shorter period of time.
2) Rating
Valuation is a short name for property valuation. It is an important step in understanding the value of investing in property.
To determine the value of an estate or a plot of land, the appraisal process is used to determine the fairness of the right price after it is placed on the market for sale.
3) Bank Rating
This assessment from the bank involves the budget value of certain assets which are analyzed by a group of professional appraisers of certain financial institutions.
It is indeed important because it will determine the amount of loan limit that may/will be given by the bank for an individual property.
That is, the bank will refer to the assessment given by their appraiser to determine the amount of loan that will be given to you as a buyer.
4) Basic Loan Rate (BLR)
The Basic Loan Rate (BLR) is the reference loan rate determined by Bank Negara Malaysia, based on the cost of borrowing money between financial institutions.
Until 2015, it was used as a reference guide for loan rates, which affect loan products on the market such as home loans.
5) Base Level
The Basic Rate (BR) is the benefit rate referred to by the bank, to determine the level of products such as home loans.
If you borrow money to invest in property, BR can give an impression on the level of benefits!
BR replaced BLR as the standard reference rate in 2015. It takes into account the cost of borrowing money for banks, and the minimum benefit rate set by Bank Negara Malaysia.
6) Earth Lot
The Earth lot is one of the four main types of land sold in Malaysia. Property built on this area may only be sold or rented to Bumiputera citizens.
The seafaring options are much more limited, and should only be considered for Bumiputera citizens. An application can be made to release the property from this barrier, even though it is rather difficult.
7) Return of Capital
Return of capital is a term that is closely related to the difference between the value of property at the time of sale, compared to the time of purchase.
8) CCRIS Report
9) Certificate of Acceptance and Compliance (CCC)
10) Agreement
An agreement is a recorded term or agreement such as a Sale and Purchase Agreement (SPA) , which offers certain terms to the owner.
It includes elements such as restrictions on how and when you can sell property. It is important as a seafarer to understand the concept of a covenant.
This is because it can provide the value that you can get from the real estate investment if development is carried out or there is an initial sale barrier.
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11) CTOS Score
More or less the CCRIS report as well, the CTOS score is an analysis run by the CTOS credit scoring agency to assess your financial history. It is often used by banks and other financial institutions to check the creditworthiness of borrowers, including housing loan applicants.
12) Debt Solemn Ratio (DSR)
The solemn debt ratio (DSR) is a method used by banks to assess your ability to pay debts, an important aspect for loan approval.
It combines the monthly net income rating with the current amount owed by you. The goal is that the bank understands your current financial situation.
In summary: It is an estimate used by banks to determine the amount of a home loan based on your ability to repay.
13) Letter of Assignment of Rights (DOA)
The Letter of Assignment of Rights (DOA) is a document used to transfer property rights between two parties.
This is to certify that the giver of the right (the owner of the property at that time) transferred the ownership to the recipient of the right (who would receive the property).
This statutory transfer document is used in cases where the Memorandum of Transfer (MOT) cannot be used, due to the current status of current ownership.
14) Free Grip
Freehold is one of the four main soil types in Malaysia. It is a type of land where ownership has no escape date, and becomes the property of the owner forever.
In terms of consolidation, it means that there is no potential for impairment associated with the term of ownership. Freehold land may be taken over by the government by force, but this is very rare.
15) Home Loan
A home loan is a loan that is requested from a bank or financial institution to help you buy land. It is subject to several important matters; for example credit checks and assessments to ensure your ability to pay.
The total amount you can borrow is limited to 90% of the bank’s valuation of the property for your first home, even if it is deducted for future home purchases.
16) Buy-House-And-Sell-Return (House Flippers)
This term is used by investors who buy old (obsolete) houses at a low price, then decorate, customize, and repair them , in order to resell them at a higher price.
Basically they buy at a low price, spend a small amount of budget to ‘upgrade’ the house, in the hope that the house can be sold for a (relative) profit in a short period of time!
17) Individual Property
An individual right of ownership is a document that is issued to a sole owner on a piece of land, without joint ownership responsibilities. Usually it includes popular property such as terrace houses, twin houses, and banglos.
18) Institutional Fender
A term that refers to large institutions such as banks, bill administrators, and pencen funds, which have a large interest in the property market.
These large institutions tend to use a collection of money from their own investors, then invest in various financial instruments, to get the investment back.
Considering that property is often seen as an asset that can be trusted and profitable, the role of institutional investors in the property industry is seen as very large.
19) Land Ownership
Land rights or called gerans are legal documents that determine the ownership of a certain plot of land or area. It is a general term that includes Individual Ownership, Strata Property and others.
A copy of the land title is kept by the Land Official of the relevant state authority. As a property investor, you should be wise in the process of assessing and accessing Land Rights.
20) Tax Handle
The tax handle is one of the four main types of land sold in Malaysia. It is land that is ‘rented’ from the local authorities.
Property sold under the tax regime has a maximum lease term, usually 99 years, and then the ownership is transferred to the State Kingdom.
It is seen that investors tend to be wary of holding tax returns with less than 20 years of taxation. Tax renewals may be made to continue this tax period.
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21) Legal Fee
A statutory fee refers to all mandatory payments to a statutory professional, for professional assistance in the process of buying or selling property.
This fee is governed by law, and is a clearly defined fee as stated in the Adviser’s Advice Order.
As a property investor, the legal fee is one of the factors that must be included in the entire real estate investment return.
22) Offer Letter
An offer letter is a written commitment by the buyer to the owner or proponent of the property, stating the intention to purchase the property.
It usually comes with a 1%-2% deposit or cash deposit . It is also called a Letter of Intent to Purchase.
23) Loan Agreement
Loan Agreement is an official document between a bank or financial institution (lender) and a home buyer (borrower) based on the terms and conditions of the loan specified.
It includes several key elements such as the loan amount, loan term, repayment terms, and the name of the individual responsible for making the payments.
24) Loan Payment
Loan repayment is the term used to refer to the approval and granting of loans in the real estate investment market.
Bank loan disbursement rates are often assessed to understand how a home loan is accessible, at any given time.
25) Loan Term
26) Locked Time
27) Long Term Investors
28) Financing Margin
29) Parent Property
30) Transfer Memorandum (MOT)
A Memorandum of Transfer is a statutory document that involves the exchange of property rights.
