Puzzled by property investment terms? Our jargon buster can help... | Vesta Property

Puzzled by property investment terminology? Our jargon buster is here to help...

November 29, 2018

Choosing to invest in property is not always a straightforward decision. As well as understanding the associated costs and risks, it’s vital that you get to grips with the intricacies of the industry. One area that can often intimidate first time investors is property jargon.

Endless abbreviations, confusing acronyms and ever-changing buzzwords plague the world of property investment. Without the appropriate support, this can easily prevent potential investors from completing sufficient research or even discourage them from investing altogether.

While some terminology is intuitive, other terms will need a little more explanation. At Vesta, we aim to make investing in property as easy and accessible as possible. That’s why we have created this useful jargon buster guide to explain the key terms that you are most likely to come across on your path to property investment.

Administration Fee

A payment charged to the new tenants of a property for the processing of the rental application.

Annual Percentage Rate (APR)

The total cost of a mortgage, including interests rates, arrangement fees and other associated costs. Typically used to help consumers compare products from different mortgage providers.  


A property that is bought with the sole intention of letting it out to tenants.

Capital Gain

The amount of profit made on the sale of an asset (i.e. property) when compared to the price it was purchased for.

Capital Gains Tax (CGT)

The tax paid on the profit made by the sale of an asset (i.e. property) when compared to the price it was purchased for. CGT typically doesn’t apply to your main place of residence but will likely apply to investment properties.


The various legal processes involved in transferring the ownership of a property from one owner to another. These administrative procedures are carried out by a solicitor or qualified conveyancer on behalf of the buyer. This includes establishing the legal boundaries of the property, the certified ownership of the property and any planned local developments that may affect the property. 

Decision in Principle (DIP)  

This is an agreement from a mortgage provider that states that they would be prepared to lend you an agreed amount of money. It is made after the provider has completed all necessary credit checks and is happy to proceed to the next stage of an official mortgage offer.


In relation to property, equity is the difference between the market value of your property and the amount of money you still owe on your mortgage. For example, if you have a house that is worth £500,000 of which you still owe £400,000 in mortgage repayments, then you will have 20% equity (£100,000) in that property.


The term used to describe the outright ownership of a property, including the land that it’s built on. The property belongs to the owner without a time limitation (as opposed to leasehold which is time restricted).


When a property seller accepts a higher offer from a third party even though they have agreed a certain price with a second party.


The term used to describe the ownership of a property and its land for a limited amount of time (also known as its tenure which is agreed with the property’s freeholder). This timeframe can vary but is typically 99, 125 or 999 years. 


A property that is bought with the intention of being moved into while you let out your original property to tenants.

Loan to Value (LTV)

The size of a loan relative to the purchase price of your property. So for example, if your property cost £500,000 and you took out a mortgage of £450,000 to buy it, the LTV would be 90%.

Negative Equity

Occurs when the market value of a property falls below the outstanding amount on the mortgage.

Red Book (RICS) Valuation

A book of professional standards published by the Royal Institution of Chartered Surveyors that contains mandatory rules and best practice guidance for anyone undertaking asset valuations.

Rental Yield

The measure of how much annual rental income is generated as a percentage of the property’s value.

Return on Investment (ROI)

How much money you get out of an investment in comparison to how much money you put into it.

Stamp Duty Land Tax (SDLT)

A progressive tax paid by the buyer of a property where the purchase price exceeds £125,000. The tax rate is 2% from £125,001 to £250,000, 5% from £250,001 to £925,000, 10% from £925,001 to £1.5 million and 12% on any property over £1.5 million. Use the SDLT calculator to see how much tax you will pay.


A professional report carried out by a qualified surveyor that inspects the property’s structural soundness and general state.


A qualified building expert who carries out an instructed survey of a property.


The conditions under which land or a property is held, i.e. freehold or leasehold.

Vacancy Rate

The proportion of vacant properties in an area relative to occupied properties. This is a useful measurement for investors to assess the rental demand of a particular area.

This list of property terminology is far from exhaustive but it should stand you in good stead for further research into property management. Remember, knowledge is power. The more informed you are about the property industry, the more astute your investment decisions will be. This is the key to successful investment, property or otherwise.

At Vesta, we believe that investing in buy-to-let properties is one of the best investment decisions you can make. While it’s not for everyone, investing in properties with tenants in situ is the best way to ensure regular rental income, minimise your costs and reduce stress for tenants. For more information on how you can invest in buy-to-let property, get in touch with our friendly and knowledgeable team today!  


Important Note

All information contained in this website is provided as a guideline only, is based on estimates and assumptions, may not be accurate or complete, and is subject to change. We make no representations or warranties with regards to this information, expressed or otherwise. A buyer who relies on such information does so at their own risk. Buyers are advised to seek independent financial advice and should undertake their own due diligence.

Your capital is at risk. Property values may decline and the property might not be able to be rented at amounts sufficient to cover debt interest costs, operating expenses and liabilities, and might not result in a positive cash flow. Property is an illiquid asset and should not be viewed as a short-term investment.

In no event will we be liable for any loss or damage, including without limitation any loss or damage arising directly or indirectly out of or in connection with the use of this website and the information contained therein.

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