Property Jargon Buster: 20 Terms Every Investor Should Know

Whether you’re new to property investment or a seasoned investor, understanding industry jargon can be overwhelming. 

To make informed decisions, it's important to be familiar with the terms that frequently come up in the property world. This property jargon buster will break down the top 20 terms and abbreviations that property investors need to know.

1. ROI: Return on Investment)

Return on Investment is a tricky one as there are many angles that it can be looked at. However, in most simple terms ROI is the percentage of profit you make on an investment.

It is calculated by dividing the net profit (profit minus costs) by the total cost of the investment. This figure helps determine how profitable a property is and how much you are getting on the money invested.

2. Rental Yield

Often confused with ROI, the yield is a percentage that indicates the annual income generated by a property relative to its purchase price. It’s a crucial metric for buy-to-let investors and also a good indicator of how a property is performing.

Here is a simple formula: Rental Yield: (Annual Rent / Property Value) x 100

3. Capital Growth

Capital growth is another key term for property investors. It refers to the increase in property value over time. After all, property is a long-term investment. 

To ensure high capital growth, you should invest in properties located in up and coming areas, undergoing regeneration or next to key transport like. High capital growth means you are earning additional money just by owning the property and can lead to higher profits you decide to sell in the future.

4. BTL: Buy-to-Let  

Buy-to-Let  is a property bought specifically to be rented out to tenants.

Mortgages for buy-to-let properties often come with higher interest rates and larger deposit requirements than residential mortgages.

5. ADS: Additional Dwelling Supplement

The Additional Dwelling Supplement is a tax applied when you buy an additional residential property, like a second home or a buy-to-let property. In Scotland the ADS is 6% on properties over £39,999. 

In England this tax is known as Stamp Duty and is 3%. Note that if you are buying a property as an LTD, even if this is your first property, it’s still subject to ADS / Stamp Duty.

6. LBTT: Land and Buildings Transaction Tax

LBTT is another form of tax for property buyers. LBTT is progressive, meaning you only pay the higher rate on the portion of the property price that falls within a particular tax band. It applies to both residential and non-residential properties. Rates vary depending on the price of the property. 

For properties under £145,000 in Scotland, the LBTT is £0.

7. STC: Subject to Contract

Subject to contract is a term used in property transactions to indicate that an agreement has been reached between the buyer and seller, but the final contract has not yet been signed.

8. LTV: Loan to Value

LTV refers to the ratio of a loan to the value of the property, expressed as a percentage.

For example, an LTV of 75% means you’ll need a 25% deposit and the remaining 75% will be covered by a mortgage. The typical LTV for buy-to-let properties is 25%, however, this can vary based on the lender’s criteria and requirements.

9. HMO: House in Multiple Occupation

House of Multiple Occupation refers to a property rented by at least three tenants forming more than one household (tenants are not related to each other). HMOs tend to offer higher rental yields but require more management and are subject to more regulations. HMO landlords often take care of all bills and expenses for the property.

10. Freehold

Freehold is when you own the property and the land it stands on outright, with no time limit on your ownership. Properties in Scotland are mainly freehold. 

11. Leasehold

You own the property but not the land it’s built on. Leaseholds are often long-term (e.g. 99 or 125 years) but will eventually expire unless renewed. It’s very common in England and Wales for properties to be leasehold. 

12. Conveyancing

The legal process of transferring property ownership from one person to another. It involves searches, contracts, and handling the transfer of funds. This is carried out by solicitors.

13. Completion

The final stage of a property transaction when legal ownership is transferred from seller to buyer. At this point, the keys are handed over, and the buyer can move in.

14. EPC: Energy Performance Certificate

The EPC has a rating system that indicates the energy efficiency of a property. It’s important for landlords to have a valid EPC before renting out a property, as regulations may restrict the renting of properties with low ratings.

15. Bridging Loan

A short-term loan used to bridge the gap between purchasing a property and securing long-term financing or selling another property. Useful in time-sensitive transactions.

16. Gazumping

When a seller accepts an offer on their property, but later accepts a higher offer from another buyer before contracts are exchanged.

17. Gazundering

When a buyer reduces their offer just before the contracts are exchanged, often putting the seller under pressure to accept due to time constraints.

18. Void Period

The time when a rental property is unoccupied and not generating any rental income. Investors aim to minimise void periods to maximise returns.

19. RICS: Royal Institution of Chartered Surveyors

A professional body that accredits property professionals worldwide. RICS surveyors provide property valuations and other critical services that help ensure the quality and legality of transactions. All home reports should be done by RICS certified surveyors.

20. Property Chain

A sequence of linked property sales where each sale is dependent on another property being sold. Chains can cause delays in transactions and are a common hurdle in the UK property market.

Whether you’re focused on buy-to-lets, HMOs or flips, having a solid grasp of these terms will guide you through the complexities of the UK property landscape.

From avoiding gazumping, being more tax efficient and ensuring high returns on your investment, we can help you navigate the property market with greater confidence. 

At MG Property Group, we specialise in helping investors like you build profitable property portfolios. With our expert guidance, you can confidently navigate the market, make smarter investment decisions, and maximise your returns

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