Property Investment Glossary

A council direction that removes certain permitted development rights in a specific area. In property investment, it most commonly means you need planning permission to convert a house to an HMO.

Why it matters: Significantly restricts HMO supply in affected areas. Check with the Local Planning Authority before buying in university cities like Oxford, Cambridge, or Bristol.

The standard tenancy agreement for private rented property in England and Wales, governed by the Housing Act 1988. Most BTL lettings use an AST.

Why it matters: Understanding AST rights and obligations protects you from costly legal disputes and ensures you can recover possession legally when needed.

A computer-generated estimate of a property's market value, built from recent sold prices, property attributes, and area data. PropertyData, Zoopla, and Nationwide all publish AVMs.

Why it matters: Useful for quick deal screening and identifying BMV opportunities, but not a substitute for a RICS survey. Confidence varies widely by postcode data density.

Acquiring a property at a price materially lower than its estimated open-market value. A 10–20% discount is typically needed to make BRRR and flip strategies viable.

Why it matters: The cornerstone of active deal sourcing. PropScout flags BMV deals by comparing asking price to AVM — look for properties priced 10%+ below the AVM.

Buy a distressed property BMV, refurbish to add value, refinance at the higher end value to pull capital back out, then let it. The cycle repeats with (some or all of) the same pot of money.

Why it matters: The most capital-efficient strategy for portfolio building — if the numbers work, you can scale quickly. If they don't (poor BMV, over-priced refurb), you can be left with money stuck in the deal.

Purchasing a residential property solely to rent out. Requires a specialist BTL mortgage (typically 25% deposit minimum, rent must cover 125%+ of stressed mortgage payments).

Why it matters: The most common UK property investment strategy. Post-Section 24, higher-rate taxpayers are often better off purchasing through a limited company.

Tax on profit when you sell a property that isn't your primary residence. Since April 2024, residential property CGT is 18% (basic rate) or 24% (higher rate) on the gain, after your annual exempt amount (£3,000).

Why it matters: Can erode flip profits significantly. Factor CGT into every flip projection — PropScout includes a CGT estimate in the Flip underwriting tab.

An area designated by the local council to protect its character. Permitted development rights are restricted — external changes (windows, cladding, extensions) typically need planning consent.

Why it matters: Limits refurbishment scope and increases planning risk. Important to check before buying for BRRR or HMO conversion.

Monthly rental income divided by monthly mortgage payment. A DSCR of 1.25× means the rent covers the mortgage 1.25 times over. Most BTL lenders require ≥125% (1.25×) at a stressed rate of 7–7.5%.

Why it matters: The critical affordability metric for BTL mortgage eligibility. Below 1.0× means the property is cashflow-negative before any expenses.

A rating from A (most efficient) to G (least efficient) measuring a property's energy use. Required by law whenever a property is sold or let.

Why it matters: Under planned MEES regulations, all rented properties will need EPC C or above by 2028. Properties rated D–G carry upgrade risk and potential unlettability.

A mandatory electrical safety inspection for rented properties in England, required every 5 years. The landlord must provide a copy to tenants.

Why it matters: A legal obligation with up to £30,000 fine for non-compliance. Always factor in cost of remedial works for older properties.

The projected end value of a completed development or refurbishment. Used by development lenders to calculate maximum loan amounts.

Why it matters: In BRRR, your post-refurb AVM is your GDV. The refinance amount (typically 75% of GDV) must be large enough to recover your purchase and refurb costs.

Annual rental income as a percentage of purchase price (or AVM), before any costs. A £150,000 property renting for £750/month has a gross yield of 6% (£9,000 / £150,000).

Why it matters: The quick indicator of rental income potential. Rule of thumb: aim for 6%+ gross yield in most markets. High-yield areas like Leeds LS6 can achieve 9–11%.

A property occupied by 3 or more unrelated people who share facilities (kitchen/bathroom). Mandatory HMO licensing applies to properties with 5+ tenants; many councils extend licensing to smaller HMOs.

Why it matters: HMOs typically generate 20–40% higher yields than standard BTL, but carry more management overhead, licensing requirements, and Article 4 planning risk.

For interest-only BTL mortgages: monthly rent ÷ monthly interest payment. Equivalent to DSCR. Lenders stress-test at 7%+ to ensure the rent covers interest even if rates rise sharply.

Why it matters: The primary underwriting metric for BTL lenders. Failing ICR means you can't get the mortgage — no matter how strong the deal looks otherwise.

The maximum housing benefit paid to private tenants in a given Broad Rental Market Area (BRMA). Set at the 30th percentile of local rents for each property size.

Why it matters: If you're targeting social/DSS tenants, LHA sets the effective rent ceiling. Some HMO strategies are built around LHA rates. Check rates at gov.uk/government/publications/lha-rates.

Your outstanding mortgage as a percentage of the property's current value. At 75% LTV on a £200,000 property, you owe £150,000. Most BTL lenders lend to maximum 75% LTV.

Why it matters: Lower LTV = lower risk = better mortgage rates. In BRRR, the goal is to refinance to 75% LTV of the post-refurb value — recovering your initial investment.

Regulations requiring all rented properties in England and Wales to have an EPC rating of at least E (currently) and C (proposed from 2028 for new tenancies). Properties below the minimum cannot legally be let.

Why it matters: A major risk for investors buying D/E/F/G-rated properties. Remediation costs range from £5,000 (basic insulation) to £30,000+ (full retrofit). Always model this into your purchase price.

Annual rental income after deducting all running costs (management fees, insurance, maintenance, voids, ground rent) as a percentage of property value. Typically 20–25% below gross yield.

Why it matters: The more honest measure of investment performance. A 7% gross yield might only be 5–5.5% net. PropScout uses 25% cost assumption for net yield calculations.

Total annual return (rental profit + capital growth) divided by money invested. A property generating £8,000 net income on £80,000 invested achieves a 10% ROI.

Why it matters: The headline performance metric. Target 8–15% ROI for UK residential BTL. BRRR strategies can achieve 20%+ by recycling capital.

UK property purchase tax paid on completion. Investors pay a 5% surcharge on top of standard residential rates. On a £200k purchase, total SDLT is roughly £9,500 (vs £1,500 for a first-time buyer).

Why it matters: A significant upfront cost that must be factored into all deal calculations. PropScout includes SDLT in the total investment figure for each strategy.

Tax changes introduced from 2017 that prevent landlords who own property in their own name from deducting mortgage interest from rental income before calculating tax. Only a 20% tax credit is available.

Why it matters: Dramatically increases the effective tax rate for higher-rate taxpayers owning BTL personally. The main reason many investors purchase via limited company structures.

Scheme allowing councils to require all private landlords in designated areas to obtain a licence, regardless of property type. Separate from mandatory HMO licensing.

Why it matters: Check if your target area has selective licensing before buying — it adds compliance cost and ongoing obligations. Check with the local authority.