Property investment Jargon: What does it all mean?
There’s a lot of jargon in businesses, isn’t there?
Lots of clunky, bizarre language and meaningless acronyms that confuse more than they clarify.
And the property industry is one of the worst offenders.
From HMOs in the PRS needing ASTs to waiting for an AIP on a BTL CRM mortgage, the property game is a tough one to grasp if you’re a rookie.
Fortunately, we’ve put together this glossary of property industry terms and acronyms and explanations of exactly what they mean.
So, you’ll never have to Google a load of random capital letters every again…
A
AIP – Agreement in Principle
When applying for a mortgage, an Agreement in Principle is a pre-application agreement on how much you can borrow.
AST – Assured Shorthold Tenancy
An AST is the most common form of tenancy in England and Wales. It allows a tenant to remain in a property for a fixed-term period, so long as they abide by the terms of a tenancy agreement. It also allows landlords to regain possession of their property at the end of a fixed term.
B
BMV – Below Market Value
If you’re able to buy a property BMV, you could be on to a winner. After all, buy low, sell high is the holy grail of any investment.
BOE – Bank of England
The good fellows who set the country’s interest rates, among other things. It’s always worth keeping an eye on the BOE’s activity, especially when it comes to mortgages.
BTL – Buy to Let
When you purchase a property to rent out, it’s classed as a BTL property – so it’ll need a BTL mortgage, too.
C
CRM – Capital Repayment Mortgage
The days of interest-only mortgages are largely over. So, if you’re looking at a mortgage for your BTL property, it will almost certainly be on a capital repayment basis – meaning you repay the loan over time rather than simply the interest.
D
DD – Due Diligence
This is a hugely important thing here at Platinum Property Partners. We encourage our potential investment partners to do their due diligence on us as thoroughly as they can.
E
EPC – Energy Performance Certificate
The EPC is one of the most important documents when renting out a property. Following new rules that came into force in April 2018, residential landlords can no longer rent out properties with an EPC rating below ‘E’.
ERC – Early Repayment Charges
If you’re looking to sell a property, you should always check with your mortgage provider in case there are ERC attached to your mortgage product.
H
HHSRS – Housing Health and Safety Rating System
Another important one for landlords. The HHSRS is used to grade a property’s suitability to be lived in and is usually used by local authorities to identify health and safety issues in residential properties.
HMO – House in Multiple Occupation
Ah, our favourite acronym! HMOs are what we’re all about at Platinum. HMOs are essentially shared living properties, which are rented out on a room basis by at least three people who are not from the same household but share facilities.
I
IHT – Inheritance Tax
Okay, so this one’s not strictly property. But if you inherit a property from a family member, you could be liable for IHT.
J
JV – Joint Venture
A JV is a business arrangement where two or more people pool their finances to purchase a specific asset – like an HMO, for instance.
JVP – Joint Venture Partner
As above, but a JVP is one member of the group pooling their resources.
N
NLA – National Landlords Association
Around 40,000 landlords in the UK are members of the NLA, which provides support for those letting residential properties.
NP – Net Profit
If you’re looking to invest in property, this is the one you’ll be interested in. Platinum investors, on average, earn between £50,000 and £150,000 in net profit from their HMO properties every year.
O
OIEO – Offers in Excess Of
When you’re searching for properties to buy as investments, you’ll probably come across the term OEIO where a seller only wants to receive offers over a certain amount for their property.
OIRO – Offers in Region Of
Similar to OIEO, but a little more flexible – giving a buyer an idea of the kind of offer that would be acceptable.
P
PCM – Per Calendar Month
Once you’ve found a property to invest in and it’s ready to be let, you’ll be charging your tenants rent PCM. Simple!
PRS – Private Rented Sector
The PRS is how the Department for Communities and Local Government refers to the sector of the UK housing market that is rented.
R
ROE – Return on Equity
Another key metric when investing in HMOs, Platinum investors, on average, generate a 10%-15% return on equity from each of their properties. ROE is a measure of financial performance, dividing net income by shareholder equity.
S
SDLT – Stamp Duty Land Tax
SDLT is payable on purchase of a property. And, if you’re a residential investor, you’ll pay an additional 3% as your rental property will be classed as a second home.
SVR – Standard Variable Rate
When your BTL mortgage product expires, you’ll be moved on to your lender’s SVR, which will usually be between 2% and 5% above the BOE base rate.
T
TDP – Tenancy Deposit Protection
When renting out your BTL property or HMO, you’ll need to take a security deposit from your tenants. This must be lodged with one of three government-backed TDP schemes within 30 days and all deposits must be handed back to tenants within 10 days of reaching an agreement on the amount to be returned.
By the end of this, you should be clear on your property investment jargon so now its time to go and use all this property investment jargon in your emails, speeches and more!
