Glossary of terms


A B C D E F G H I L M N P R S T V

A
Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT)

The Property Crowd has obligations under the Anti-Money Laundering and Countering Financing Terrorism Act 2009 to give the public confidence through customer due diligence, account monitoring and suspicious transaction reporting.

B
Buy Order

The placing of an order by an investor to buy PropertyShares available for a particular property.

C
Capital Gain

Capital gain is the increase in value of an asset or investment over time. With The Property Crowd we are referencing PropertyShares. Capital gain is typically measured by the difference between the current value, or market value, of PropertyShares and their original price (the value at the time the investment was acquired).

Capital Loss

Capital loss is the loss incurred if an asset or investment decreases in value. Capital loss is realised if an asset or investment is sold for a price that is lower than the original purchase price. A capital loss is realised if an asset or investment is sold, it is the difference between the purchase price and the price at which the asset or investment is sold, where the sale price is lower than the purchase price.

Capital Returns

Capital returns are the return on your capital, this can be positive or negative. When you sell your PropertyShares and exit the investment if you make a profit this is called Capital Growth, if you make a loss this is called Capital Loss.

Cash Reserve

A sum of money that is initially raised when a property is funded and is held in the property’s Holding Company account. The money is held to cover repair and maintenance costs as well as any other expenses that apply to an extended period of time. The money can be replaced over time from rent collected.

Cashflow

A record of the income and expenses of a property. The Property Crowd uses cashflow forecasts to estimate yield when a property is initially funded.

Constitution

The constitution of the SPV which outlines the terms under which the directors and shareholders operate the holding company.

D
Debt

A sum of money that is owed or due. An amount of money borrowed by one party from another, typically the arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

Dividends

The act of distributing the net monthly rental income for a particular property to a PropertyShares owner. Rent is collected and shared proportionately between the investors who own PropertyShares in a particular property (net of Property Management Company fees and any other expenses and maintenance costs). Each share of rental income is paid directly into an investor’s Property Crowd account each month. Investors can either withdraw their monthly dividend or reinvest them to build their portfolio. Dividends payable from rental income on a property (once costs have been deducted) are paid monthly to your account on the 5th day of every month. If the 5th day falls on a weekend or public holiday then your dividend payment will be made on the next available working day. Dividends are payable to those holding shares at 12.00 am on the 1st day of every calendar month.

Due Diligence

Due diligence is an investigation or audit of a potential investment. It refers to the care a reasonable person should take before entering into an agreement or a financial transaction with another party. The Property Management Companies conduct due diligence and evaluates prospective properties against a thorough evaluation criteria to assesses valuation, build quality, compliance, location and considers scope for return before offering a property on the platform. Investors are responsible for undertaking their own due diligence investigations concerning any investment with The Property Crowd.

E
Equity

Equity is the difference between a property’s market value and any outstanding debt against the property. With The Property Crowd we refer to the difference between current valuation and the total value of all PropertyShares at current valuation.

Evaluation Criteria

The Property Crowd properties are thoroughly evaluated using a set of criteria determined by The Property Crowd. The criteria include build quality, compliance, location and considers scope for return.

F
FMA

The Financial Markets Authority (FMA) is the New Zealand government agency responsible for financial regulation. The FMA are responsible for regulating all financial market participants, exchanges and the setting and enforcing of financial regulations. The Property Crowd holds a crowdfunding licence to act as a prescribed intermediary under the Financial Markets Conduct Act 2013 and is regulated by the FMA. This means that The Property Crowd has fulfilled FMA’s licensing requirements and standards and is monitored on an ongoing basis to ensure it maintains those standards.

Funding total

The initial (total) cost of funding a new property on The Property Crowd Platform. This consists of the property’s purchase price, any related costs, and a cash reserve.

Funds Available

Funds available is the value of money you have in your Property Crowd account available to purchase available PropertySha

G
Gearing

The strategy of borrowing money to purchase a property, otherwise known as leveraging. This normally takes place with the use of a mortgage. Gearing has the effect of amplifying returns or losses when a property changes in value.

Gross Rental Income

Gross rental income is the amount of rent derived from a property before any related expenses have been deducted (also referred to as ‘Rental Income’).

Gross Rental Yield

The gross rental yield is the annual gross rental income shown as a percentage of the purchase price or value of a property.

H
Holding Company

With The Property Crowd this refers to the limited company or SPV that owns the investment property. It has a legal status that isolates the single investment property. As a shareholder you are buying shares in the holding company which we call PropertyShares.

Holding Company

With The Property Crowd this refers to the limited company or SPV that owns the investment property. It has a legal status that isolates the single investment property. As a shareholder you are buying shares in the holding company which we call PropertyShares.

I
Imputation Credits

Imputation credits are a tax credit that is transferred to the shareholder to reduce the tax shareholders have to pay on dividends. It allows The Property Crowd to pass on tax paid at the company rate.

The benefits are that these imputation credits can be used to reduce your income tax (already paid on the dividends) or potentially be received as a tax refund.

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

Initial Order (funding) Phase

This is the period starting from the date a new property is launched on The Property Crowd’s Platform right through to Settlement Date. PropertyShares are reserved during this time as pending orders.

Investment Case

A report that summarises key the features of the property. Typically it will outline the reasons for you to consider investing in that property. Features may include location, build quality and estimates for returns.

Investor

An investor with The Property Crowd is a registered and verified member who invests in The Property Crowd platform’s properties.

L
Liquidity

The ease of turning your PropertyShares into cash.

Lowest available PropertyShares

This is the lowest price at which an investor can purchase PropertyShares via the Resale Market.

M
Maintenance Allowance

Refers to a cash reserve collected when a property is initially funded. The reserve is used to pay for repairs & maintenance and any expenses that cover periods longer than one month. The reserve is then topped up and will reduce dividends until it is back at the levels needed to maintain the property.

Member

A member with The Property Crowd is a person who has joined the platform by completing the full registration and verification process and is able to buy and sell PropertyShares.

N
Neighbourhood Price Index

The average rate of growth per year for all properties in a particular suburb. Our data is sourced from CoreLogic.

Net rental income

Net rental income is the amount of rent derived from a property after any related expenses have been deducted.

Net rental yield

The net rental yield is the annual net rental income shown as a percentage of the purchase price or value of a property.

P
Pending orders

Orders that a member has placed. When PropertyShares are bought for a new property, the funds to cover this future acquisition of PropertyShares are unable to be withdrawn or applied to other ProperyShares purchases. Pending orders can be cancelled at any time prior to Settlement by contacting our office two working days in advance.

Platform

Is the website established by The Property Crowd under its licence.

Portfolio

The total value of PropertyShares in dollar terms based on current valuation.

Property Crowd Account

A member's account from which a member can make deposits and withdrawals, manage their portfolio of investments and edit their settings.

Property Evaluation Criteria

The Property Crowd properties are passed through a series of checks which assess build quality, compliance, location and considers scope for return before being offered on the platform.

Property Management Company

The Property Management Company that takes care of the day to day business of managing the investment property.

PropertyShares

PropertyShares are the way you invest in a portion of an investment property with The Property Crowd. PropertyShares are shares in a holding company that owns a property. So when you own PropertyShares, you share an ownership in a property via the holding company. We use the term PropertyShares to keep things simple.

PropertyShares Price

The PropertyShares price is the dollar value payable per PropertyShare either during initial funding or via the resale market. When a property is in the initial funding phase, the PropertyShares price is calculated by The Property Crowd. Thereafter PropertyShares can be sold on the resale market, the price is then set by the seller of the PropertyShares.

Purchase Date

The date of settlement of the acquisition of property when it is fully funded on the platform.

R
Rental Income

Rent paid by the tenant before any expenses are paid out. Also referred to as gross rental Income.

Rental Yields

Yield is a measure of how much rent a property generates each year as a percentage of that asset's value.

The Net Rental Yield deducts the expenses from rental income before calculating the yield (as opposed to Gross Rental Yield which does not take into account any expenses).

Resale Market

Refers to the operation of The Property Crowd’s secondary market. The Property Crowd offers a service to members should they wish to sell their PropertyShares. Members have an opportunity to set the number and price (Sell Order) of PropertyShares they wish to liquidate. A successful sale relies on finding a willing buyer prepared to meet the price set.

Resident Withholding Tax (RWT)

When The Property Crowd pays a dividend it is obligated to deduct RWT at the appropriate rate and forward this to Inland Revenue. The Property Crowd elects to deduct RWT at the default rate of 28%. On receipt of a certificate of exemption from the member The Property Crowd can pay the full amount of dividends.

S
Sell Order

The placing of an order to sell PropertyShares. As a seller you have the opportunity to sell a set number of ProperyShares at a price you specify. A successful sale relies on finding a willing buyer prepared to purchase your PropertyShares at the price specified. Sell orders can be canclled at any time.

Settlement

Settlement is the final stage of a property sale wherein the buyer completes payment of the contract price to the vendor and takes legal possession of the property.

Special Purpose Vehicle (SPV)

With The Property Crowd this refers to the limited company or holding company that owns the investment property. It has a legal status that isolates the single investment property. As a shareholder you are buying shares in the SPV which we call PropertyShares.

T
Tax

The Property Crowd deducts residents withholding tax (RWT) from your monthly dividend payments (net share of the rent returns). The RWT rate is based on your taxable income. All dividends are fully imputed and The Property Crowd’s policy is to transfers imputation credits to the shareholders. These are shown in your monthly dividend statements. Any gains or losses made on the sale of your PropertyShares may have tax implications. Please refer to your accountant or tax advisor about any implications relevant to your situation.

The Property Crowd Property

Any property currently available or previously offered on The Property Crowd Platform.

Transaction History

Transaction History is shown on the dashboard tab in your Property Crowd Account which records a full history of buy and sell orders.

V
Valuation

A property valuation carried out by an external independent valuation company. The Property Crowd have appointed CoreLogic to perform this service. The Property Crowd use two types of valuations.

A full market valuation is a comprehensive valuation report which includes a property visit from an independent valuer. Full market valuations are carried out every two years.

A desktop valuation is a lighter desktop valuation report that does not include an onsite inspection by a valuer. These are carried out every three months.

Independent valuations are used to calculate the value of each property and initial PropertyShares price.