In this blog post we clarify some of the most common property investment jargon. Read on for our glossary of property investment terminology below.
Firstly, if you’re new to property development, you might be interested in our Property Investment for Beginners blog post and infographic.
Property Investment Jargon Busting Glossary
BTS / B2S (Buy to Sell / Buy to Flip)
Buy to sell is a way of making a profit on a property in a relatively short space of time. Typically you would add value to the property through DIY, renovations and interior decoration. Think Sarah Beeny‘s Property Ladder, Homes Under the Hammer and House Doctor (not be confused with the Property Doctor)!
Learn more about buy to flip at Yopa.
BTL (Buy to let)
Buy to let is when you purchase a property in order to rent it out and make a regular monthly profit through that rental.
Learn more about buy to let mortgage options at the Money Advice Service.
BRR (Buy-Refurbish-Refinance / Rent)
BRR means buying a property, adding value by refurbishing or renovating, and then refinancing and renting it out.
You could add value by redecorating, adding a new bathroom or bedroom, altering the layout of the property, restoring period features, or simply repairing and repainting it.
Essentially, refinancing means that you can take all or most of the money that you originally invested in the property back out, since the property has risen in value since you bought it.
Learn more about BRR at Property Secrets.
Also known as capital appreciation, capital growth is the profit that you make on a property investment (a house for example), measured by the increase in its value over and above the amount that you have invested.
Learn more about capital growth vs. rental yield at Romans.
Commercial property is (as you might have guessed!) non-residential property which is only used for business purposes.
Learn more about the benefits of commercial property investment at Small Business.
Property crowdfunding is a comparatively new way of investing in property. Typically, you would invest online (through websites such as Simple Crowdfunding) along with a large number of other investors to each buy a share of a property.
You would then either receive a share of the profits once the property is developed and sold or you would receive a proportion of the rental income from that property, depending on the nature of the investment.
This can give the benefits of a great return on investment without the complications of managing a rental property.
Learn more about crowdfunding and how it works at Simple Crowdfunding.
Deal sourcing / packaging
Deal sourcing is a way of generating income whereby you find, negotiate and package property deals in order to sell on to a property investor or developer.
Learn more about property deal sourcing at Property Investments UK.
HMO (Houses of Multiple Occupancy)
The UK government defines an HMO as a residential property where at least three tenants live, forming more than one household. A household is either a single person, or members of the same family who live together.
Each tenant shares toilet, bathroom or kitchen facilities with the other tenants.
Typical forms of HMO would be student accommodation or professionals who flat-share.
Learn more about HMOs at Platinum Property Partners.
NMD (No Money Down)
No money down is an umbrella term for a host of different property strategies which involve property investors using very little or none of their own money upfront. These include joint venture (JV) finance or option agreements.
Learn more about no money down strategies at Achieve Property.
PRS Private Rental Sector
Private Rented Sector housing (in the UK) refers to any privately owned property, rented out to a tenant by a landlord.
We can further sub-divide the PRS sector, thus:
- Market renters
These renters pay market rents and occupy their homes under a tenancy agreement
- Non-market renters
These renters do not pay rent. They may be living rent-free in a relative’s property or occupying their accommodation as part of their employment (e.g. a building caretaker or pub manager).
Find out more about the Private Rental Sector at Bidwells.
R2R (Rent to Rent)
This is also known as guaranteed rent, whereby you make an agreement with a landlord to manage and pay a fixed rent on their property for a period of time. You then rent out the property at a higher rate. You can achieve this by setting the property up as serviced accommodation (see below) or by converting that property to an HMO (see above). The landlord has a guaranteed income with no property management to deal with and you make a profit – win-win!
Learn more about rent to rent at Property Geek.
SA (Serviced Accommodation)
Serviced accommodation is fully furnished property which is available to rent either short or long-term via websites such as Airbnb or Booking.com This kind of property may offer facilities such as a concierge, gym or other hotel-like service such as housekeeping.
Learn more about investing in serviced accommodation at Premier Property Education.
SPV/SPE (Special Purpose Vehicle/Special Purpose Entity)
A special purpose vehicle is an ancillary of a parent company. SPVs are often used for joint ventures. A joint venture is where two or more parties enter into a business agreement after deciding to work together on a project.
The parent company forms an SPV as a separate company (a trust, corporation, limited partnership etc). The SPV serves to isolate financial risk and secure debt. This means that if the parent company goes bankrupt, the obligations and assets of the SPV (as a legally separate company) remain secure.
Learn more about special purpose vehicles at Investopedia.
Yield is how much of an annual return you can expect to get on your investment.
You can calculate property yield by expressing a year’s rental income as a percentage of how much you paid for the property.
Has this blog post has helped to help clear up some property investment jargon for you?
Did we miss anything?