Accrual
Expenses incurred that have not yet been invoiced. Funds are set aside – accrued – in anticipation of the invoice.
Active order
A buy order placed by an investor who has cash in their account and can therefore trade when a corresponding sell order is placed.
AML
Armageddon clause
A clause in a lease that allows the tenant to break the lease in certain extreme circumstances.
Armageddon score
Our cautious assessment of how likely an armageddon clause is to be triggered.
Arrangement fee
A fee taken by Housemartin when a property is first purchased. Read more.
AST
Assured shorthold tenancy. This is the most common form of tenancy in the UK.
Buy price
A price put forward by an investor to buy an investment on the Exchange.
Capital gains/growth
The increase in the value of an investment due to the rising price of the investment. If the investment is sold at this increased value then the gain is said to be realised, otherwise the gain is unrealised.
Capital loss
A capital loss is the loss incurred when a property (or loan part) is sold at a lower price than the original purchase price.
In the case the physical property is sold then the purchase price will include any sunk costs.
Combined scaling score
This takes 4 of the Risk scores and produces a Combined scaling score. This is applied to the Capital loss estimate to produce the Scaled capital loss.
The calculation is as follows:
Combined scaling score = (the time to break score + rental counterparty credit score + armageddon score) * ease of replacement of tenants score
Contingency fund
A buffer set aside to cover any unexpected costs. Read more.
Contingency target
The target level of an AST contingency fund. Read more.
Conveyancing
The legal transfer of a property from one owner to another
Creditor
Costs that have been incurred and invoiced but not yet paid.
Development loss
The loss if development work is undertaken that runs into problems that result in additional costs in excess of the amount budgeted
Development risk
Our assessment of how much work is scheduled to be undertaken on the property before the lease commences.
Dividend income
Income we have been advised is taxable on the investor as dividend income for income tax purposes. Investors should seek their own tax advice. Read more.
Ease of replacement of rental counterparty
Our assessment of how easy it would be to find a new counterparty on similar terms to lease the property
Ease of sale of property
Our assessment of how easy it would be to sell the physical property at a fair market value. Specialist property is considered harder to find a buyer
The Exchange
Our marketplace for investors to buy or sell their investments (loan parts).
The FCA
The Financial Conduct Authority is a financial regulatory body that regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom.
Fixed costs & contingency (FCC)
We call the fixed costs involved with the purchase (stamp duty, legal fees, our fees, a provision for contingency and any costs of upgrading the property) ‘Fixed costs & contingency’ or ‘FCC’.
One of the main advantages of investing with Housemartin is that trades on our secondary market (the Exchange) are frictionless. The new buyer pays the FCC for the trade, meaning the seller is fully reimbursed. Investors in a traditional buy-to-let property have no way of recouping these sunk costs when they sell the property.
Freehold
The freeholder of a property owns it outright, including the land it’s built on. The freeholder is responsible for maintaining the property and land.
FRI lease
Full repairing and insuring lease. A lease where the responsibility to undertake all repairs and maintenance and to pay for insurance falls on the leasee.
FSCS
Financial Services Compensation Scheme
Gross price
The gross price is the net price + FCC.
Gross yield
The annual income expressed as a percentage of the current gross price of the property.
Ground rent
Payments (typically annual) made by the holder of a leasehold property to the freeholder.
HMO
House in multiple occupation. A home is an HMO if at least three tenants live there, forming more than one household with bathroom or kitchen facilities shared between tenants.
HPI
House price index. This is a national statistic produced by the Land Registry that shows changes in the value of residential properties in England, Scotland, Wales and Northern Ireland. This data is split by type of property (detached, semi-detached, terraced, flats and maisonettes) and by local authority area.
Inactive order
A buy order placed by an investor who has no cash in their account and therefore cannot trade until the account is funded.
Interest income
Income we have been advised is taxable on the investor as interest income for income tax purposes. Investors should seek their own tax advice. Read more.
Internal Repairing Lease
A lease where the responsibility of most or all of the internal repairs lies with the tenant but external and structural repairs remain the responsibility of the landlord.
IFISA
Innovative Finance Individual Savings Account
ISA
Landlord
The owner of a house or property that is leased to an individual, a business, or other organisation (e.g. a charity).
Lease
A contract outlining the terms under which one party agrees to rent property owned by another party.
Lease renewal likelihood
How likely we assess the rental counterparty is to renew the lease.
Leaseback
An arrangement where a company sells a property to a purchaser and then leases it back from them for a given period of time.
Leasehold
Under a leasehold you own the property for the length of the lease agreement with the freeholder. When the lease ends, ownership reverts back to the freeholder.
Leveraged/Geared
Funding part of a property purchase with a mortgage or loan.
Match
When an active buy order ‘matches’ with a corresponding sell order to allow a transaction(trade) to take place.
Monitoring fee
A percentage of the gross rent received for the property taken by Housemartin to cover day-to-day systems and administration. Read more.
Net price
The net price is the price of the property excluding the costs associated with the purchase (FCC). This is the price you would typically see advertised in an estate agent or on Rightmove.
Net price (Sell)
Value of a property based on the lowest price offered by a seller on the Exchange.
Net yield
The annual income, less expected costs (such as managing agents fees, service charge, ground rent, etc) expressed as a percentage of the current gross price of the property.
Sell price
A price put forward by an investor to sell an investment (loan part).
Order
A buy or sell price placed by an investor on the Exchange.
Pre-launch buy order
Buy orders that are set before a property has been launched on the platform (ie before the purchase has been completed). When the property completes the pre-launch orders will automatically convert to regular buy orders.
Prepayment
Payments for goods or services that have not yet been received. An example is a service charge, as these are typically invoiced in advance for the following period.
Property Companies
Limited companies set up specifically to own each property on the platform. This is done to ring fence investments and protect investors. The Property Companies’ Articles of Association are highly restrictive. This prevents them from carrying out any activity other than owning the property/assets and requires its directors to act in the best interests of Lenders at all times.
Rental counterparty credit score
An assessment of the credit worthiness of the rental counterparty, i.e. how likely they would be to break the lease.
Rental loss
The estimate of rental loss is a pessimistic view taken that legal action will be required to repossess the property and the time taken to do so is currently set at 12 months. We also assume that we can not recover any of the rent due during this period, which hopefully would not be the case. The estimate of rental loss is therefore calculated as property net yield * gross price on the Exchange.
RICS valuation
A valuation of the property undertaken by a Royal Institution of Chartered Surveyors (RICS) registered surveyor. RICS is a professional body promoting and enforcing the highest international standards in the valuation, management and development of land, real estate, construction and infrastructure.
Risk factors
Qualitative assessments of risk factors as determined by Housemartin. These factors feed into the risk framework model.
Risk grids
A set of grids that convert the Risk factors into Risk scores. These scores are then combined with the estimates of capital and rental losses to generate the scaling coefficients. The grids have been set by Housemartin and are reviewed regularly.
Risk rating
The Risk rating is an overall assessment of the risk of a loss of investing in the loan at the current market price.
Risk scores
Risk scores are used to generate the Scaled capital loss and Scaled rental loss from the estimates of Capital loss and Rental loss respectively. They are generated using the Risk Grids with the Risk factors as inputs.
Scaled capital coefficient
The Scaled capital loss divided by the current gross price of the property, expressed as a percentage.
Scaled capital loss
The scaled capital loss is calculated by multiplying the estimate of capital loss by the Combined scaling score.
(This is done to produce a scaled figure that takes into account the likelihood of the estimated loss ever coming to pass).
Scaled rental coefficient
The Scaled rental loss divided by the current gross price of the property, expressed as a percentage.
Scaled rental loss
The scaled rental loss is calculated by multiplying the expected rental loss by the Rental counterparty credit score.
(This is done to produce a scaled figure that takes into account the likelihood of the estimated loss ever coming to pass).
Scaled total coefficient
This is the sum of the Scaled capital coefficient, Scaled rental coefficient and Dev risk coefficient.
(The Scaled total coefficient is plugged into the Risk grid to produce the ultimate Risk rating for the property).
SDLT
Stamp Duty Land Tax. A tax charged by the government on the purchase of property and land.
Service charge
Service charges are payable by the leaseholder to the landlord (or landlord’s agent) for the services provided, as determined by the lease. Service charges normally include costs for maintenance, repair and insurance of the building and communal areas plus the employment of staff and management of the property.
Sunk Costs
Expenditure that has been spent on things that would not be recovered on sale, such as stamp duty, the loan arrangement fee, utilities, legal fees and bills.
Tenant
An individual or business that rents a property from a landlord.
Total return
The complete return from a property/investment. This includes interest/rental income plus capital gains (realised and unrealised), alongside any bonuses paid.
Two-factor authentication (2FA)
Two-factor authentication (2FA).
Underwriters
A group of eligible Lenders that fund the initial purchase of a property.
Vote
All significant decisions impacting an investment on the platform will require an investor vote. Read more.
Yield
The annual return on an investment (excluding capital movements), calculated by expressing annual income as a percentage of the initial investment amount.