As a property investor, understanding key investment terms is essential to making informed decisions and navigating the investment process smoothly. Whether you’re a seasoned landlord or new to the world of property, this investment glossary will give you the knowledge you need to feel confident about your investment choices.
At Prosperity Wealth, we’re here to simplify property investment with flexible payment plans and expert property management, so you can focus on growing your portfolio.
AST (Assured Shorthold Tenancy)
A common rental agreement in the UK that gives tenants the right to live in a property for a fixed period, typically 6 or 12 months. At the end of the AST term, landlords can reclaim the property by issuing a Section 21 notice
Buy-to-Let (BTL)
A property purchased with the intention of renting it out. BTL properties generate rental income and can offer long-term capital appreciation.
Bridging Loan
A short-term loan used to bridge the gap between buying a new property and selling an existing one.
Example: Investors often use these loans when purchasing a property at auction.
Bricks and Mortar
A term used to describe the tangible, physical aspect of property. In investment, “bricks and mortar” refers to the value of the property itself, as opposed to more abstract investments like stocks or bonds.
Cash Flow
The difference between your income and expenses for a given period. Positive cash flow means your property generates more income than it costs to maintain, while negative cash flow means you’re losing money.
Capital Appreciation
This is the increase in property value over time. Investors aim for capital appreciation to gain from the property’s rising value.
Example: A house bought for £150,000 might appreciate to £200,000 after a few years.
Capital Gains Tax (CGT)
Tax on the profit made when selling a property that isn’t your primary residence. Investors should factor CGT into their long-term strategy.
Completion Date
The date when the buyer pays for the property, and the ownership is legally transferred. This is the final step in the property buying process.
Deposit
The amount of money paid upfront when purchasing a property, typically between 5% and 25% of the property’s value. The higher the deposit, the lower the loan-to-value (LTV) ratio, which can lead to better mortgage rates.
Equity
The difference between the value of your property and the amount owed on the mortgage. Investors often tap into their equity to fund additional property purchases.
Exchange of Contracts
The point at which the sale of a property becomes legally binding. After this, neither party can back out of the deal without facing penalties.
Freehold
Complete ownership of both the property and the land it stands on, with no time limit. Many investors prefer freehold properties as they don’t have to deal with ground rent or lease expiration.
Gross Profit
This is the income you generate from a property before deducting any expenses. For property investors, gross profit typically refers to the total rental income received from tenants before considering costs like maintenance or property management.
Gross Yield
The total rental income as a percentage of the property’s purchase price.
Example: If a property costs £100,000 and the rental income is £5,000 per year, the gross yield is 5%.
Ground Rent
A regular payment made by a leaseholder to the freeholder for the land on which the leasehold property is built.
HMO (House in Multiple Occupation)
A property rented out by three or more tenants who aren’t from the same household. HMOs often require specific licences and management due to their complexities.
There are currently no terms under ‘I’
Joint Venture (JV)
When two or more investors combine their resources to purchase or develop property. This allows for shared risk and potential greater buying power.
There are currently no terms under ‘K’
Leasehold
Ownership of the property but not the land, usually for a fixed period. Ground rent and service charges often apply.
Example: A leasehold flat in a block may have a 99-year lease and incur annual ground rent.
Loan-to-Value (LTV)
This percentage shows how much you are borrowing in relation to the property’s value.
Example: A property valued at £250,000 with a mortgage of £200,000 has an LTV of 80%.
There are currently no terms under ‘M’
Net Profit
Net profit is the actual profit after all expenses have been deducted from the gross profit. This includes costs like repairs, property management fees, mortgage payments, and taxes.
Example: If your rental income is £15,000 per year and your expenses total £5,000, your net profit is £10,000.
Net Yield
This takes expenses like maintenance, insurance, and property management fees into account, providing a more accurate reflection of your return.
Example: If your annual expenses are £1,000 and you make £5,000 from rent, your net yield is 4%.
Off-Plan Property
A property that is purchased before it is fully built. Investors often buy off-plan to secure a property at a lower price, hoping for value appreciation by the time it is completed.
Property Portfolio
The collection of properties owned by an individual or company for investment purposes. A diversified portfolio may include various types of property, such as residential, commercial, and HMOs.
There are currently no terms under ‘Q’
Refinancing
This involves replacing an existing mortgage with a new one, often to get better terms or release equity. Investors use refinancing to access funds for further investments.
ROI (Return on Investment)
A percentage measure of how much profit or return you’re making on an investment relative to the cost of the investment. It’s a critical metric for evaluating the success of property investments.
Example: If you spend £200,000 on a property and make £20,000 net profit in a year, your ROI is 10%.
Rental Income
The total amount of rent a landlord receives from tenants over a specified period. This is often the primary source of income for buy-to-let investors.
Rental Yield
The percentage return on an investment property through rental income. It is one of the key metrics used by investors to measure profitability.
Section 21
A legal notice used by landlords in England and Wales to terminate a tenancy agreement. Often referred to as a “no-fault eviction.”
Service Charge
A fee paid by leasehold property owners to cover the costs of maintaining common areas, such as hallways or gardens, in a building or development.
Stamp Duty Holiday
A temporary reduction or suspension of Stamp Duty Land Tax, aimed at stimulating the property market. Investors should be aware of any current tax relief schemes
Stamp Duty Land Tax (SDLT)
This tax is payable when you buy property over a certain price. For investors, additional rates may apply to buy-to-let properties.
Surveyor’s Report
An inspection carried out by a qualified surveyor to assess the condition and value of a property. It’s often used by lenders before approving a mortgage.
Tenancy Deposit Scheme (TDS)
A government-backed scheme that protects tenants’ deposits. Landlords are required to place deposits into an approved scheme to ensure fair handling and return at the end of the tenancy.
There are currently no terms under ‘U’
Void Period
A time when a rental property is unoccupied, meaning you won’t receive rental income. Proper property management can help minimise void periods.
There are currently no terms under ‘W’
There are currently no terms under ‘X’
Yield
The yield represents the return on your investment, usually expressed as a percentage. There are a few different types of yield used in investing they are:
There are currently no terms under ‘Z’
At Prosperity Wealth, we simplify the process of property investment by doing all of the hard work for you, from our range of investment properties for sale in the best locations but also help maximise your returns with our expert guidance and tailored solutions such as full property management.
We understand that making a substantial upfront investment isn’t always feasible for every investor. This is where our Prosperity Monthly Payment Plan steps in. You can spread the cost of your investment over a set period, making it easier to get started without needing a lump sum. With fixed monthly payments, you gain greater financial flexibility and easier access to high-quality property investments. This is particularly beneficial for those looking to gradually build a portfolio without straining their cash flow.
For more information on property investments and how Prosperity Wealth can help you grow your portfolio, whether you’re overseas or based in the UK, get in touch with us today via phone on +44 (0) 121 237 4610 or email info@prosperity-wealth.co.uk to get started on your investment journey.
Not necessarily. At Prosperity Wealth, our payment plans make property investment more accessible, allowing you to spread the cost over manageable monthly payments. This means you can invest in property without needing a large upfront deposit.
We handle every aspect of managing your property, from leasing to maintenance, ensuring a steady stream of tenants. This helps reduce void periods and ensures your rental income remains consistent.
We do more than just provide investment opportunities. We take care of everything from finding tenants to managing your property. Our expert team guides you through every step of the process, making it simple and stress-free. Plus, our payment plans open doors for those looking to enter the market without hefty initial investments.
