A. Agreement in Principle
The mortgage amount that a lender would “in principle” be able to offer a buyer. Decision made based on a credit search and basic personal information.
Property purchased for the sole purpose of being rented out to tenants. Strategy opted for by investors wishing to generate profit by charging more in rent than the outgoing mortgage repayments, before achieving capital gains when selling in the future.
C. Capital Gain
An increase in the value of a capital asset (in this case, property), that gives it a higher value than the original purchase price.
The initial sum payable to secure a property, the balance is payable later in the purchase process.
The value of a property, minus the amount of money owed for said property. If you owe £100,000 for a property that’s valued at £500,000, you have £400,000 equity.
F. Fixed Rate Mortgage
A mortgage in which the interest rate on the mortgage loan is fixed. A low, fixed rate usually available for a fixed amount of time and is used to attract new custom.
G. Guaranteed Rental Period
A period of 12 months or more that a property developer will guarantee your rental payments regardless of void periods or non-payments.
H. HMO – House in Multiple Occupation
A house being occupied by more than two persons, not of the same family. A property investment type that typically generates high yields and low void periods.
I. Interest only Mortgage
A mortgage in which the borrower only pays interest on the mortgage. The term is usually around 5 – 7 years, and the original amount borrowed must then be paid off at the end of the term.
J. Joint Ownership
Term used when more than one person owns a property. There are lots of different ways to jointly purchase including joint tenants and tenants in common.
K. Key Return
An investor’s main investment and return goal.
L. Land Registry
Government department that records the owners of land and under what conditions.
M. Mortgage Redemption Figure
The figure required to repay the outstanding capital and interest of a mortgage.
N. Net Return
Income from your investment once all expenses from the gross income are deducted.
O. Off Plan Property
To buy off plan is to secure a property before completion, at times before construction. Investors are often able to secure a property with a relatively small deposit, and flip for a profit before completion.
P. Property Portfolio
A collection of property investments owned by an individual, group or company.
Q. Quantity Surveyor
Professional who manages all costs relating to building projects. They aim to minimise the costs of a project and increase value for money, while still achieving the required standards and quality.
R. Reservation Fee
The payment made to secure a property and take it off the market. Often required when investing in a new or off-plan property. This can be non-refundable, but forms part of the purchase price.
S. Stamp Duty Land Tax (SDLT)
You have to pay Stamp Duty if you buy a property costing more than £125,000 (£40,000 for additional homes) in England. Since the new regulations were introduced, Stamp Duty will not be payable on properties up to £300,000 for first-time buyers. Work out how much you may have to fork out here.
T. Tenant Type
Students, young professionals, families, The Silver Generation. Segments of potential tenants with varying requirements, that offer different benefits and drawbacks to the investor.
U. Under Offer
The term used when a sale is agreed or sold subject to contract but contracts haven’t been exchanged.
Legal name to describe the seller of a property.
Term used when buyer the withdraws their offer. Usually occurs before searches have taken place to limit money lost.
X. Generation X
Generation X is the population born after baby boomers and before Generation Y, typically considered as those born between mid 1960’s and early 1980s. Almost 50% of Gen X plan to finance retirement by investing in property, yet almost a quarter of the demographic are yet to get on the ladder.
The annual return you are going to make on an investment. Calculated by dividing the annual rental income by the value of the property, expressed as a percentage.
Z. Zero Ownership Fees
Hotel investment opportunities are typically free of ownership fees such as service charge, ground rent, management fees or stamp duty. However, terms such ‘zero ownership fees’ should may vary in definition depending on the developer, so always confirm fees before going through with an investment.