Property Investment Glossary

Acquisition Costs

The total costs of acquiring a property, including the purchase price and any associated legal fees.

Bridging Loan

A short-term loan which enables you to finance a new investment while waiting for the proceeds of an existing one to become available.

Buy-to-let

A property which you procure for the purposes of letting to residential or commercial tenants.

Buy-to-let Mortgage

A finance arrangement made to purchase property for the sole purpose of letting to tenants. These usually have different rates and lending terms than those sought for occupying property.

Capital Appreciation

The amount by which an asset will increase in value over a set period of time. Any decrease is described as Depreciation.

Capital Gain

The amount of profit made on an asset when it’s sold. Net Capital Gain is the amount of profit remaining after costs are deducted which is subject to taxation.

Capital Gains Tax (CGT)

A levy due on Net Capital Gains.

Collateral

The assets which are used as security against a loan.

Commercial Property

Buildings or land intended for business use, such as offices, distribution centres or retail outlets.

Covenants

Restrictions on the use of a property that are attached to the deeds and remain in place regardless of who owns them.

Deposit Protection Scheme

A legal banking requirement for landlords who offer assured shorthold tenancies.

Distressed Properties

Properties which need renovation or refurbishment to make them habitable and desirable to tenants or buyers.

Diversification

The spreading of risks across a diverse range of investment properties and/or land.

Due Diligence

Investigations undertaken by investors and professional parties involved in an investment to ascertain its risks and potential.

Equity

The difference between a property’s value and any debts secured against it.

Equity Release

A percentage of property equity that a lender will release on finance.

Exit Strategy

A planned end-point of an investment.

Fixed-rate Mortgage

A mortgage which has a fixed interest rate for the duration, or specified term of the loan.

Flipping

Properties which are bought and sold on quickly, often with little or no works being undertaken to add value.

Freehold

Buyers of these kinds of property have complete ownership and control of them.

Gearing

Defined as a ratio, gearing represents the amount of debt you have in relation to any equity.

Ground Rent

The amount which owners of leasehold property pay the owners of the freehold.

Holiday Let

A property which is let to holidaymakers for no more than 31 days at a time.

House of Multiple Occupation (HMO)

This usually refers to properties where three or more unrelated tenants share communal areas and property access.

Inflation

The rate at which the value of property increases.

Interest-only Mortgage

A finance arrangement in which only the loan interest is paid until the property is sold or the loan period ends, at which point the capital must be repaid.

Interest Rates

The amount a lender charges for the privilege of borrowing, often expressed as an annual percentage rate or APR.

Lease

A contract giving residential or commercial use of a property to a tenant for a specified period of time.

Liability

A debt, including tax, that you are legally obliged to pay.

Liquidation

The selling of assets to raise capital.

Loan to Value

Loan-to-value is the amount of debt you owe described as a percentage of a property’s value.

Mortgage

A bank loan for purchasing a property which is used as security against it.

Negative Equity

When debts against a property outweigh its value.

Portfolio

A collection of investment properties or land.

House Price Index (HPI)

Data which reports on the actual price of housing across the UK.

Investment Strategy

A plan which details investment objectives and how any properties will be financed, managed and released to achieve them.

Off-plan

Properties bought based on construction plans before they are built.

Off-market

Also described as ‘Below Market Valuations,’ this term refers to properties which are either not available for sale on the open market or which are discounted against their actual market value.

Property Cycle

A period of time during which the housing market may experience stages of boom, bust and recovery.

Repossessed Property

Land or buildings which have been seized by a lender, often because of defaults on the repayments of loans secured against them.

Yield

Usually calculated on an annual basis, gross yield is the financial return you can expect from rental income on a property and is represented as a percentage of the purchase price. Net yield takes into account any expenditure on managing and maintaining a property during that time.

If you can’t find the term you’re looking for here or need further advice or information about property investment, contact one of our experienced National Property Portfolio advisors who will be able to help with your enquiries.