Property investment glossary
59 terms defined clearly. Every term includes a full definition and most include a worked example.
A
Allowable ExpensesCosts a landlord can deduct from rental income before calculating the tax owed, including letting agent fees, repairs, insurance, and accountancy.Article 4 DirectionA planning restriction that removes permitted development rights in a specific area, typically requiring full planning permission to convert a property to HMO use.
B
Below Market Value (BMV)Purchasing a property for less than its current open market value, typically due to motivated seller circumstances, poor condition, or legal complications.Bridging LoanA short-term, secured loan used to finance property purchases quickly before longer-term finance is arranged, typically priced at 0.75-1.2% per month.Buy-to-Let (BTL)The practice of purchasing a residential property specifically to let to tenants rather than to live in, typically funded with a specialist buy-to-let mortgage.
C
Capital Gains Tax (CGT)Tax paid on the profit made when selling a residential investment property, charged at 18% for basic rate taxpayers or 24% for higher rate taxpayers as of 2025/26.Cash-on-Cash ReturnThe annual cashflow from a property expressed as a percentage of the total cash invested, measuring the actual return on your deployed capital.ChainA sequence of linked property sales where each transaction depends on the completion of another, creating interdependency and potential for delays or collapse.CompletionThe final stage of a property purchase when funds are transferred and legal ownership passes to the buyer.ConveyancingThe legal process of transferring property ownership from seller to buyer, carried out by solicitors or licensed conveyancers on both sides.Corporation TaxThe tax paid by limited companies on their profits, including rental income and capital gains from property sales.Council TaxLocal authority tax on residential property, paid by the occupier or by the landlord during void periods.Covenant (Restrictive)A legally binding restriction on what a property owner can do with their land, typically registered against the title deeds.
D
Damp Proof CourseA horizontal barrier built into walls during construction (or inserted remedially) to prevent moisture rising from the ground into the structure above.Discounted Cash Flow (DCF)A valuation method that calculates the present value of a property by discounting all future cashflows to today's value using a chosen discount rate.
E
F
G
GazumpingWhen a seller accepts a higher offer from another buyer after already accepting an offer, leaving the original buyer without the property.Gross YieldAnnual rental income expressed as a percentage of the purchase price, before any costs are deducted.Ground RentAn annual payment made by a leaseholder to the freeholder as a condition of the lease, typically for leasehold flats and houses.
H
I
ICR (Interest Coverage Ratio)The ratio of monthly rental income to monthly mortgage interest, used by lenders to assess whether a BTL property generates sufficient income to service the debt.Instant Sale CompanyA company that offers to buy properties quickly for cash at a discount to market value, typically used by vendors who prioritise speed over maximum price.
J
L
Land RegistryHM Land Registry is the government body that registers ownership of land and property in England and Wales, maintaining publicly searchable records of all sales.Landlord InsuranceSpecialist insurance for rental properties covering buildings, landlord liability, loss of rent, and legal expenses - distinct from standard home insurance.Lease ExtensionThe process of extending the remaining term of a leasehold property's lease, typically required when it falls below 80 years to protect value and mortgageability.LeaseholdA form of property ownership where the buyer holds the property for a fixed term (the lease) and must pay ground rent to the freeholder who owns the land.Letting AgentA property management company or individual that finds tenants, collects rent, and manages properties on behalf of landlords, typically charging 8-15% of rent.Limited Company (SPV)A company structure used to hold investment properties, providing potential tax advantages over personal name ownership particularly for higher-rate taxpayers.LTV (Loan to Value)The mortgage balance expressed as a percentage of the property's value, used by lenders to assess risk and determine available rates.
M
Making Tax DigitalHMRC's programme requiring landlords to maintain digital records and submit quarterly updates, mandatory for those with gross income over £50,000 from April 2026.Mandatory LicensingThe national requirement for HMO landlords to hold a council licence for properties with 5 or more occupants forming 2 or more households.Mortgage Stress TestA lender's calculation checking that a property's rental income will still cover mortgage payments if interest rates rise, typically assessed at 5.5% or higher.
N
P
Planning PermissionFormal approval from a local planning authority required before carrying out certain types of development or change of use on a property.Portfolio LandlordAn investor with four or more mortgaged buy-to-let properties, triggering additional underwriting requirements from most BTL lenders.
R
RemortgageReplacing an existing mortgage with a new one, either with the same lender (product transfer) or a different lender, typically to access a better rate or release equity.Rental YieldA measure of the return on a rental property expressed as a percentage, either before costs (gross yield) or after costs (net yield).Repayment MortgageA mortgage where monthly payments cover both interest and capital, gradually reducing the outstanding loan balance until full repayment at the end of the term.Retention (mortgage)When a lender withholds part of the agreed mortgage advance until specific repairs or improvements to the property have been completed.ROI (Return on Investment)The total return from a property investment over a period, including both income and capital gain, expressed as a percentage of the total cash invested.
S
SDLT (Stamp Duty Land Tax)Tax payable on property purchases in England and Northern Ireland, with a 5% surcharge on additional residential properties from October 2024.Section 21A legal notice allowing landlords to regain possession of a rental property without providing a specific reason, abolished in England by the Renters' Rights Act 2025.Section 24Tax legislation restricting mortgage interest relief for individual buy-to-let landlords to a 20% tax credit, regardless of their marginal tax rate.Section 8A possession notice served on tenants for specific legal grounds such as rent arrears or antisocial behaviour, now the primary route to possession following abolition of Section 21.Selective LicensingA council-designated scheme requiring all private landlords in a specific area to hold a licence, regardless of property type or number of occupants.Service ChargeAn annual or monthly charge paid by leaseholders to the freeholder or management company to cover maintenance and management of shared areas.Sinking FundA reserve fund maintained by a freeholder or management company to cover future major works on the building, contributions made by leaseholders through their service charge.Sitting TenantA tenant who is already living in a property at the time it is sold, with their tenancy rights transferring to the new owner.SPV (Special Purpose Vehicle)A limited company set up specifically to hold and manage property investments, used to achieve tax advantages and structural clarity.Survey (RICS Level 2 vs Level 3)An independent structural assessment of a property by a chartered surveyor, available at Level 2 (standard homes) or Level 3 (detailed, for older or complex properties).
T
Title DeedsLegal documents proving ownership of a property and recording any rights, obligations, or charges attached to it.Title InsuranceInsurance that protects against financial loss arising from legal defects in a property's title, such as missing planning permissions or restrictive covenant breaches.Tracker MortgageA variable-rate mortgage where the interest rate moves in line with a benchmark rate (usually the Bank of England base rate) plus a fixed margin.
V
Vacant PossessionCompleting a property purchase with no occupants, giving the buyer immediate and unencumbered access to the property.ValuationA formal assessment of a property's market value by a qualified surveyor, typically required by the mortgage lender before advancing funds.Void PeriodA period when a rental property is unoccupied and generating no rent, during which the landlord must continue paying the mortgage and other fixed costs.