When you first begin dipping your toes into the property investment market it can feel quite daunting. Very few make property investment decisions without carrying out vast amounts of research to ensure they understand the market. So making sure your knowledge is on par with other investors can seem like a complicated task; but what often makes it worse is the huge amount of confusing terminology that property literature is literally stuffed with.
Phases like double net lease and affordability tax can make reading the property sections of most national newspapers more of a headache than a pleasure. At Belgrave Group we're aware of this problem and as we've been involved in property for a long time we have a better understanding of what most of these phases mean.
In this introduction to property terminology we're going to look at some of the most common terms and phases and explain what they mean.
Fair market value refers to the price an asset would fetch in the marketplace under the following conditions:
1. First of all the prospective buyers and sellers must be reasonably knowledgeable about the asset, they must be acting in their own best interests and should not be under any pressures to buy or sell.
2. A reasonable time period is given for the transaction to take place.
Fair market value is a phase used across many different markets. For example in the insurance industry car insurance ?rms will pay out the fair market value to a customer whose car has been written off in an accident.
Economic blight refers to the visible and physical decline of a property, area or city due to a combination of economic downturns. For example the economic impact of a major employer leaving a town.
Although areas can struggle with the issues created by economic blight in the recent years of premium property prices investors have become increasingly keen on investing in deprived areas to regenerate them and in turn create huge profits.
A bullet loan is a loan that requires a balloon payment at the end of the term and anticipates that the borrower will need to re-finance the loan in order to meet the balloon payment obligation. These types of loans are more riskier to borrowers as their equity in the property does not increase over time.
Jingle mail describes the process of a homeowner posting the keys back to a lender when the owner can no longer afford the mortgage repayments. Sometimes if an owner has fallen behind significantly on the repayments they may see the loan as a lost cause and would prefer to settle the debt directly rather than go through a foreclosure process.
Originally this term came to be in the saving crisis in the early 1990s but it became popular again in the subprime property crash of 2008.