UK property investment glossary
The words that come up over and over when you invest in UK property, explained in a sentence or two without the padding. Where a calculator puts the term to work, it is linked.
- BRRR
Buy, Refurbish, Refinance, Rent. You buy below the value the property will have once improved, do the work, revalue and refinance to release most of the original deposit, then let it out. It only works when the finished valuation genuinely exceeds what you paid plus what you spent — which is why the refurbishment stage is where the strategy is won or lost.
- Buy-to-let (BTL)
A property bought to rent out rather than live in. It carries its own mortgage type, assessed on the rent rather than your salary, and its own tax treatment — including the stamp duty surcharge that applies to an additional property.
- Capital growth
The increase in a property’s value over time, as distinct from the rent it produces. Growth and income pull in different directions: the areas that deliver one rarely deliver the other well, which is why deciding which you are buying comes before choosing where.
- Cash-on-cash return
Annual profit divided by the cash you actually put in — deposit, stamp duty, fees and refurbishment — rather than by the property’s price. It is the number that lets two very different deals be compared honestly.
- EICR
Electrical Installation Condition Report. A periodic inspection of a property’s fixed wiring, required for rented homes in England and renewed on a cycle — commonly five years, and shorter on some HMOs. One of the certificates a council checks first.
- EPC
Energy Performance Certificate, rating a property from A to G. A valid EPC is required to let a property, and minimum-standard rules restrict letting the worst-rated stock. The required minimum has been under review, so check the current position before buying something that will need work to reach it.
- Freehold
Outright ownership of the building and the land it stands on, indefinitely. No lease to run down, no ground rent, no service charge and no third party whose permission you need to alter or sublet.
- GDV
Gross Development Value: what a property is expected to be worth once the work is finished. Every flip and BRRR calculation hangs off it, and an optimistic GDV is the most common reason a project that looked profitable was not.
- Gross yield
Annual rent divided by the purchase price, before any costs. Useful only for a first filter: it ignores management, voids, maintenance and finance, so it always flatters a deal. Gross yields of 5-6% are typical in the north of England and 3-4% in the south east.
- Ground rent
A payment made by a leaseholder to the freeholder, historically for the land the building sits on. The rules around ground rent on residential leases have been changed by recent legislation, so what applies depends on the age and terms of the specific lease — read the contract rather than assuming.
- HMO
House in Multiple Occupation: a property let to three or more people forming more than one household, who share a kitchen or bathroom. Mandatory licensing applies in England at five or more occupants from two or more households; below that, councils operate their own additional and selective schemes.
- ICR (interest coverage ratio)
The margin by which a lender requires the rent to exceed the mortgage interest at a stressed rate. Typically 145% for a limited company or higher-rate taxpayer and 125% for a basic-rate taxpayer. It, not your income, is what decides how much you can borrow on a buy-to-let.
- Interest-only
A mortgage on which you pay only the interest, leaving the capital outstanding at the end of the term. The large majority of buy-to-let mortgages work this way because the monthly cost is materially lower — the trade is that the debt still has to be repaid, by sale, refinance or from profits.
- Leasehold
Ownership of the right to occupy a property for a fixed number of years, rather than of the land itself. Most UK flats are leasehold. Below roughly 80 years remaining, extending the lease becomes markedly more expensive and lenders get more restrictive — so the years left matter as much as the price.
- LTV (loan to value)
The loan as a percentage of the property’s value. Buy-to-let lenders typically cap it at 75%, which is where the standard 25% deposit comes from. A lower LTV usually buys a lower rate.
- Net yield
Annual rent after running costs, divided by the purchase price. It counts management, voids, maintenance and insurance, so it is a far better guide than gross. A property advertised at 7.5% gross commonly lands nearer 4.4% net once the costs are real.
- Right to Rent
The legal check a landlord or agent in England must make to confirm a prospective tenant may rent property in the UK. It is carried out before the tenancy agreement is drawn up, and failing to do it carries penalties for the landlord.
- Section 24
The tax change that stopped individual landlords deducting mortgage interest as an expense, replacing it with a basic-rate credit. It is the single biggest reason higher-rate taxpayers weigh buying through a limited company, which can still deduct interest in full.
- Selective licensing
A council scheme requiring a licence to let ordinary rented homes — not just HMOs — within a designated area. The designations change, and a property that needed no licence when bought can fall inside a new scheme. Always check the specific address with the local authority.
- Service charge
The annual amount a leaseholder pays toward maintaining communal areas, insuring the building and managing it. It can be revised upward, and major works can trigger a separate one-off demand — both of which turn an apparently cheap flat into an expensive one.
- Stamp duty (SDLT)
The tax paid on a property purchase in England and Northern Ireland, charged in bands. An additional property or a company purchase pays a surcharge on top of every band, and a non-UK-resident buyer pays a further 2%. On a £200,000 buy-to-let the bill is around £11,500, against £1,500 for the same house bought as a home.
- Stress test
The lender’s check that the rent covers the mortgage interest at a rate higher than the one you will pay — commonly around 5.5% — by the required coverage ratio. It is why a property that comfortably covers its real payment can still be refused a mortgage.
- Tenancy deposit protection
The legal requirement to place a tenant’s deposit in an approved scheme and give them prescribed information within a set period. Getting it wrong exposes the landlord to a penalty and can block a possession claim later.
- Void
A period with no paying tenant, and no rent. Budgeting a void allowance — commonly around 5% — is the difference between a model that survives reality and one that does not. In an HMO the allowance is per room, because a shared house rarely empties all at once.
Some of this vocabulary rests on rules that have been changing — licensing, leasehold, energy standards. Where that is true the entry says so: confirm the current position before making an expensive decision on it.