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  • Writer's picturePat Harper

Buy-to-Let Jargon Buster

Updated: Apr 4


'Too late didn't read' cute puppies

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Getting into the property market is a daunting prospect. It goes without saying that the industry can be a confusing place with all the technical talk to contend with. It's hard to keep up with the flood of information, whether you're an established player or new on the scene.


Many of these unfamiliar and confusing terms are an obstacle to new real-estate investors. Being able to convey the right message to property professionally is important if you want to go far in property.


We've rounded up the most common property terms so you can make your way through the process with confidence!



Assets (and liabilities)

Assets are things that bring you income without you actively working - in other words they put money in your pocket. When a buy-to-let property is properly set-up, the rental payments will pay the mortgage, will pay your managing agents, will cover all other costs AND still put money in your pocket at the end of each month.


Aside from a business that operates without you having to work in it, other examples of assets include art, and dividends from stock and bond investments.


Conversely, a liability depreciates in value over time rather than putting money in your pocket. ‘Rich Dad Poor Dad’ is a book that shows what the difference between assets and liabilities can mean in the long run, and has inspired people to invest in property - be sure to add it to your read list!



BTL or B2L (Buy-to-Let)

Buy to let is a property investment strategy in which an investor purchases a property with the primary purpose of letting it.



Chain

You are in a chain if you need to sell a property before you can afford to buy your next one. It is also possible for the person who you are selling to and buying from to also be in a chain! Chains can be very long.


One person in the chain breaks off, the entire link can come undone. Investors and 1st-time buyers complete chains and are therefore seen as valuable buyers.



CGT or Capital Gains Tax

Capital Gains Tax (CGT) tax is a charge levied when you sell property or other assets for more than their purchase price. The answer to this... never sell a buy-to-let!



DiP/AiP (Decision in Principle/Agreement in Principle)

This is a document from a mortgage lender which confirms that the lender has verified your financial information and declared that they are happy to provide you a mortgage. Acquiring a DiP can be one of the 1st steps you need to do before finding a property. This document can help you demonstrate that you are a serious buyer and that you are willing and ready to move forward in purchasing the property.



EPC (Energy Performance Certificate)

Starting April 1st 2020, landlords can no longer legally rent out properties without an EPC rating of ‘E’ or above. In addition to this, the government has also mandated that all new tenancies must have a rating of ‘C’ or higher on their Energy Performance Certificates by 2025. By 2028 all existing tenancies will also need to meet this criteria. To check your tenancy's EPC rating, follow this link.



HMO (House in Multiple Occupation)

A HMO (House In Multiple Occupation) is a rented residence that houses three or more individuals who share common areas like kitchens and bathrooms. Recent legislation now requires landlords to hold a HMO license. Additionally, you will likely be required to apply for planning permission because the government has taken away permitted development rights, in many areas, that previously allowed you to convert a normal house into a HMO.



Liability

Liability, is the opposite of an asset (see description of asset above). It is something that represents a financial drain on your finances. It could be unused subscriptions, vacation expenses, clothing, eating out or cars. Robert Kiyosaki, author of ‘Rich Dad Poor Dad’, details the differences between assets and liabilities. Millions of people around the world have been inspired by his advice and now own property - maybe you’re one of them?



LTV (Loan-to-Value)

Loan to Value (LTV) is a ratio that reflects the amount of money that the mortgage lender lends you with respect to your property's value. A higher LTV means a higher mortgage amount.


E.g. take a £100,000 purchase price with a 75% LTV, the mortgage would be £75,000 and your deposit would be £25,000. Is there any other asset that banks will lend you 75 percent of its value? They certainly wouldn't lend you 75% of the purchase price of cryptocurrency!



PRS (Private Rental Sector)

The term ‘private rental sector’ (PRS) encompasses all types of private renting in the UK. At the most basic level, it refers to tenants who rent from a landlord or letting agent.



PRS (Property Redress Scheme)

To be a fully compliant property deal sourcer you must register with the property redress scheme. This is to ensure that the client's interests are protected.



Property Portals

Property portals are the most popular way of people finding a property to rent or to buy. The UK's top 3 property portals are: Rightmove, Zoopla and OnTheMarket.



R2R (Rent to Rent)

A Rent-to-Rent is when someone rents a property whilst offering guaranteed rent. They then rent the property to a different tenant who will pay more each month. In order to achieve a higher rent, the 'rent to renter' adds value, for example, by refurbishing the property.



Hi, it's Pat Harper - Director of TPG.

Why not leverage my experience and knowledge in the property investing! I'll hold your hand every step of the way, sparing you time and money, as we work together on your perfect investment property which will inevitably build you wealth.


Claim your COMPLIMENTARY investment discovery call – click here now!.



Property sourcing in Liverpool

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