Whether you are speaking with your property agent, mortgage advisor or having one of those heated conversations with friends at dinner, knowing your HMO’s from your PBSA’s could stand you in good stead.

Read on for a breakdown of some familiar terminology that you either already understand or alternatively might help you win that friendly argument at your next dinner party.

A

Annualised Return or ROI

Otherwise known as ROI (return on investment), this gives you the average amount earned by your property investment each year. To calculate we add together the total rental income and estimated capital growth.

Asset Class

The term for a broad group of investments that share similar traits and characteristics. Property, equities, and bonds are examples of different asset classes.

B

Below Market Value

A property that is for sale at a price deemed lower than the market average.

Buy-to-Let (BTL)

A property purchased, be that a house or an apartment which is aimed at the rental market and let to a tenant(s).

Build-to-Rent (BTR)

A modern purpose-built rental property, typically located in city centres and equipped with communal facilities such as on-site gymnasiums, live/work lounges, 24/7 concierge etc.

C

Capital Gains Tax (CGT)

Capital gains tax is applicable on the profit you make when selling a property. Allowances do apply and the rules are ever evolving so seek help from a tax expert when selling your property.

 Capital Growth

The increase in the value of a property over time, measured by comparing it against its original sales price.

 

 

Comparative Market Analysis (CMA)

A property’s estimated value, based on the value of similar properties sold in the same location. Valuers will use this when carrying out mortgage valuations for the lender.

D

Diversification

The key to any successful portfolio. The aim is to spreading your risk, enhance capital growth and minimise losses during market downturns.

E

Equity

Property equity is the value assigned to the sum that is between the current property value and the outstanding level of debt i.e. remaining mortgage balance.

F

 

 

Financial Asset

A non-physical liquid asset, such as bonds or stocks, where value is derived from a contractual claim.

Financial Conduct Authority (FCA)

The UK regulatory body for the financial services industry that seeks to protect investors.

Fully Managed Investment

A property which requires no management on the part of the owner. A developer will manage the tenancy, maintenance, and other management services for you and will deduct this cost from your gross monthly income.

G

Gross Development Value (GDV)

The estimated value of a real estate development if the building were to be sold on the open market based on the current economic climate.

Gross Rate of Return

The total rate of return on your investment before deducting any related fees and expenses e.g. management fees, service charges.

Gross Yield

Usually stated as a percentage, the gross yield is the rate of return your property generates each year (for example, through rental income) before deducting all related fees and expenses e.g. management fees.

H

High-Net-Worth Investor (HNWI)

In the UK, a high-net-worth investor is classed as an individual who earns more than £100,000 a year, or holds net assets valued at £250,000 or more.

Houses in Multiple Occupation (HMO)

A property in which two or more people who are not members of the same family live together. This can often be a house purchased to house students for instance. 

I

Institutional Investor

An organisation that invests money on behalf of its members e.g. hedge funds

Income Tax

A tax charged on the income you earn in the UK. This includes rental income from investment property.

K

Know Your Client

The legal process undertaken by investment companies and financial services organisations which verifies the identity of both their clients and the source of funds to prevent against money laundering.

N

Net Profit

The actual profit you make from your investment following the deduction of all associated costs and fees.

Net Yield

The actual annual rate of return on your investment following the deduction of all associated costs and fees.

O

Occupancy Level

Usually given as a percentage, the occupancy level is the proportion of properties within a building that are currently occupied by a tenant.

Off-Plan

A property that has yet to be built or completed. Buying off-plan means you are investing based on the architect or developer’s plans of what the finished property will look like. These typically benefit from 10 year building guarantees from completion and can often be discounted if purchasing at an early stage.

Open Market Value

A realistic prediction of the price your property could sell for if it were put up for sale.

P

PBSA – Purpose-Built Student Accommodation

Modern developments of apartments specifically designed for university students. PBSA developments typically provide a higher standard of quality and facilities than older-style student homes.

Portfolio

A selection of investments belonging to an individual or group. An investment portfolio can consist of multiple assets in the same asset class, or it can be a mixture of different asset classes.

R

Residential Property Investments

An investment in a property that will be used as a place of residence by the occupant.

S

Stamp Duty Land Tax (SDLT)

A tax that is payable upon the completion of purchase of a property in England and Northern Ireland. Rates vary on a range of factors, such as property value and location of the purchaser.

 

Student Property Investments

An investment in a property that will be used to provide accommodation for university students.

V

Void Period

A period of time when a rental property doesn’t have a tenant living in it and, therefore, is not generating rental income for the owner.

Y

Yield

Usually given as a percentage, the yield is the earnings a property has achieved for its owner over a given period of time. For example, a property that cost £200,000 to buy and that generates £10,000 in rental income over 12 months has a gross yield of 5% for that year.