April 22, 2021
Are you new to the world of Property Investment? You are? Then there’s every chance you’re feeling daunted at the welter of acronyms and abbreviations that come with the property sector. It’s easy to become bogged down as you try to make sense of it all. The good news? We’re here to help. We’ve filtered out the most commonly used acronyms and explained each one clearly in layman’s terms. So, here goes. We’ll start with the easiest one of all…
You probably don’t need this one explaining, but let’s not presume! Buy-to-let is a term that refers to the use of a property or the type of investor you are.
Rent-to-rent is when you rent out a property to a tenant on a single let basis. This tenant will rarely live at the property, and will be free to sub-let its rooms as they see fit. Depending on the type of property and the agreements made, sometimes the arrangement involves a small amount of refurb work, converting offices/lounges etc into extra bedrooms.
Buy Refurbish Refinance Rent or BRRR is an increasingly common investment strategy used to purchase property. 'Buy refurbish refinance rent' refers to when an investor intends to purchase a property, add value to it by refurbishment and then refinance it onto a Buy to Let mortgage to then rent to a tenant.
This is a property that’s rented by several individual tenants. They each have their own room but share facilities, such as the bathroom and kitchen. Recently in the news is the fact that you now need to have a license to run an HMO.
As a landlord who lets their property to a tenant, you’re part of the PRS.
You’ll come across this as part of the mortgage application process for B2L. Loan-to-value refers to the percentage of your property that is mortgaged and the amount that belongs to you. For example, You take out a mortgage for £200,000 for a house that is worth £250,000. Then you will have a loan-to-value of 20%. The less capital you have to start out with as a property investor, the higher loan-to-value you’ll need.
Many don’t appreciate the importance of an EPC. These certificates contain information about the energy usage of a property. Efficient properties earn a rating of A, with the lowest rating being G.
An EPC gives an indication as to the cost of heating and powering a property. It also includes recommendations of energy-efficient improvements, the cost of carrying them out, and the potential savings in pounds and pence that each improvement could generate. As a landlord who fails to have an EPC, you could be fined as much as £5,000.
These are linked to your EPC and represent the legal minimum standards of energy efficiency that you’re obliged to achieve. As a landlord, your properties must be at level E or higher. These apply to be both new and ongoing tenancies.
This is the tax on the profit you gain when you sell your property that has increased in value. If you bought a house for £250,000 and then sell it on for £300,000,you’ll have to pay tax on the £50,000 difference.
As you can tell, the world of property, like any specialised area, is steeped in acronyms. We’ve covered a handful of the most important and most regularly used. However, these are just the tip of the acronym iceberg. They illustrate just why, especially when you’re new to property investment, you need to have an expert at your side.
Talk to us at Donelan Property. We know property. We know investment – and we’re here to help.
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