Published: August 18, 2020

Property investment glossary: All the key definitions

Written by Amber Furr
Property Investment Manchester

Select Property Group has compiled a UK property investment glossary, listing some of the most common property investment definitions to help new and returning UK property investors.

Do you know your PBSA from your HMO?

Unsure of what exactly stamp duty tax is?

Whether you’re considering a UK property investment for the first time, or you just want to double-check your interpretation, we’ve put together a property investment glossary to help you buy with complete clarity.

We hope you find it useful. And, if you’d like to talk to us about our latest UK property investment opportunities, simply head over to our contact page to submit your enquiry.

UK Property Investment Glossary

A

Annualised ReturnThe average amount earned by your property investment each year, is calculated by total rental income and estimated capital growth.
Asset ClassThe 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 (BTLAn older-style property, originally designed for homeowners, that has since been converted into a rental home for tenants.
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, compared with the price you originally paid for it.
Capital GrowthThe increase in the value of a property over time, is measured by comparing it against its original sales price.
Collective Investment SchemeFor a property within a development classed as a collective investment scheme, profits and rental income is shared between all owners within the development. These schemes should be clearly defined and regulated by the Financial Conduct Authority.
Comparative Market Analysis (CMA)A property’s estimated value, based on the value of similar properties sold in the same location.

D

DiversificationThe process of adding different types of asset classes to an investment portfolio, thereby spreading your risk and minimising losses.

E

EquityProperty equity is the difference between its estimated value and the owner’s outstanding level of debt i.e. remaining mortgage balance.

F

Family OfficePrivate wealth management companies that offer services to ultra-high-net worth investors.
Financial AssetA non-physical liquid asset, such as bonds or stocks, where value is derived from a contractual claim.
Financial Conduct Authority (FCA)The regulatory body for the financial services industry that works to protect consumers. Find out more about the FCA.
Fully Managed InvestmentA 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 is based on the current economic climate.
Gross Rate of ReturnThe total rate of return on your investment before deducting any related fees and expenses e.g. management fees.
Gross YieldUsually 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

HedgeAn investment strategy whereby you make an investment to offset your exposure to wider financial and economic fluctuations. For example, many investors will buy a property in an overseas market to achieve returns in a stronger foreign currency when the currency in their home country begins to devalue.
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 Occupations (HMO)A property in which two or more people who are not members of the same family live together.

I

Instiutional InvestorAn organisation that invests money on behalf of its members e.g. hedge funds
Income TaxA tax charged on the income you earn in the UK. This includes rental income from investment property.

K

Know Your ClientThe 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 ProfitThe actual profit you make from your investment following the deduction of all associated costs and fees.
Net YieldThe actual annual rate of return on your investment following the deduction of all associated costs and fees.

O

Occupancy LevelUsually given as a percentage, the occupancy level is the proportion of properties within a building that are currently occupied by a tenant.
Off-PlanA 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.
Open Market ValueA realistic prediction of the price your property could sell for if it were put up for sale.

P

PBSA – Purpose Built Student AccommodationModern developments of apartments specifically designed for university students. PBSA developments typically provide a higher standard of quality and facilities than older-style student homes.
PortfolioA 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 InvestmentsAn 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 the purchase of a property in England and Northern Ireland. Rates vary on a range of factors, such as property value.
Student Property InvestmentsAn investment in a property that will be used to provide accommodation for university students.

V

Void PeriodA 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

YieldUsually 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.
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