Glossary

Debt

Money owed by one party to another. The borrower has to repay the money at a later date, typically with an obligation to pay interest on a periodic basis, usually monthly or annually. A debt usually takes the form of a loan or a mortgage.

Developer

A property developer. A person or company that seeks to make money by building new homes or renovating existing properties.

Dilution

A reduction in the ownership percentage of a company caused by the issue of new shares, resulting in each existing shareholder owning a little less than it did before the new shares were issued.

Diversification

A risk management technique that mixes a wide variety of investments within a portfolio. This can be done by combining investments of different sizes and types in various regions, with the aim of lowering risk and raising returns.

Dividend

The distribution of a portion of a (property owning) company’s profits to shareholders (i.e. Share Investors). Dividends are typically payable monthly and are calculated as gross rent, less deductions for:

1. Property related costs (including property management, maintenance and insurance)
2. Corporation Tax
3. SPV Reserve and estimated void periods.

Dividend Tax

An income tax levied on the dividend payments received by the shareholders of a company. This is payable to HMRC directly by each individual through their annual tax return. The latest dividend tax rates are published on the Governmnet's website.

Dividend Yield

An annual measure of the net income received from dividends expressed as a percentage of the total cost of the investment.

Example: The price of a property is £90,000 and the transaction costs are a further £10,000, meaning the total cost of the investment is £100,000. This property generates £15,000 in rent per year, less £7,000 in management and other costs. This results in a dividend yield of 8% i.e. £8,000 net income (£15,000 rent less costs of £7,000, divided by £100,000 investment cost).