Investment Terminology: A Glossary of Key Terms

Investing in fractional real estate introduces a vocabulary that may be unfamiliar if you are coming from stocks, savings, or no investing background at all. Platforms, property pages, and distribution notices all use these terms, and misunderstanding them can lead to poor decisions — confusing gross yield with net yield, or unrealised gain with realised gain. This glossary defines the most important terms in plain English so you can read property pages and investment documents with confidence.

The terms are grouped loosely by theme: ownership and structure, income and returns, risk and valuation, and taxation. Where a term has a dedicated article elsewhere in the Academy, it is noted so you can go deeper.

SPV (Special Purpose Vehicle): A separate legal company created to hold a single property and nothing else. Investors buy shares in the SPV; the SPV owns the building, collects rent, pays expenses, and distributes net income. The SPV ring-fences the property's finances from the platform and from other properties. See the dedicated article "How SPVs Work".

Fractional ownership: An ownership model in which a single property is divided into many small shares held by multiple investors, each entitled to a pro-rata share of income and capital proceeds. Distinct from a REIT, which is a traded fund owning a portfolio of properties.

Share (or unit): The smallest indivisible unit of ownership in a property SPV. Your share count determines your pro-rata claim on income and capital. See "Understanding Ownership Units".

Pro-rata: In proportion to your share count. If you own 5% of the shares, you receive 5% of distributions and 5% of sale proceeds.

Distribution: A payment of net rental income from the SPV to its shareholders, in proportion to share count. Distributions are the income component of your return; they are distinct from capital returns, which occur at sale.

Rental yield: The annual rental income a property generates, expressed as a percentage of its value. Gross yield uses total rent; net yield subtracts operating expenses. See "Rental Yield Explained".

Cash-on-cash return: The annual cash distribution you receive divided by the cash you invested. It measures income only and ignores capital gains and the time value of money. See "IRR and Cash-on-Cash Return".

IRR (Internal Rate of Return): The annualised discount rate that makes the present value of all cash flows — your initial investment, each distribution, and the final exit proceeds — equal to the initial investment. It is the most complete single measure of total return because it accounts for timing. See the dedicated article.

Capital gain: The profit realised when a property is sold for more than its acquisition cost. It is distinct from income (distributions) and is typically taxed differently. An unrealised gain is a gain that exists on paper (the property has been revalued upward) but has not been converted to cash because the property has not been sold. A realised gain is the actual profit received at sale.

Total return: The combined return from income (distributions) and capital appreciation over the holding period. A property that yields 5% and appreciates 3% per year has an approximate total return of 8%.

NAV (Net Asset Value): The total value of a property's assets minus its liabilities. For a single-property SPV, NAV is approximately the property's current valuation minus any outstanding debt or obligations. Per-share NAV is the NAV divided by the number of shares outstanding — the theoretical value of one share.

Cap rate (capitalisation rate): The net operating income of a property divided by its value. It is the yield a property produces at its current price. A lower cap rate means a higher value for a given income; a higher cap rate means a lower value. See "How Property Valuations Work".

Appreciation: The increase in a property's market value over time. It is realised only when the property is sold or revalued. See "Capital Appreciation".

Projected return: A model output — the return that would result if a set of assumptions (rent, expenses, occupancy, appreciation, hold period) all hold true. It is an estimate, not a guarantee. See "Projected vs Actual Returns".

Hold period: The target number of years the platform expects to own a property before selling it. Your capital is committed for this period. See "Investment Horizons".

Liquidity: The ease and speed with which an investment can be converted to cash at a fair price. Fractional real estate is illiquid by design; exits are planned, not on demand. See "Liquidity Restrictions".

Exit window: A planned or available opportunity for investors to sell their shares and realise their capital — either through a property sale or a secondary market. See "Exit Windows & Liquidity".

Risk profile: An assessment of an investor's capacity and willingness to bear risk, based on factors like horizon, income, net worth, and psychological tolerance. It determines which investments are suitable. See "Risk Profiling".

Diversification: Spreading capital across multiple investments so that no single outcome dominates your portfolio's result. See the dedicated article.

Secondary market: A platform-operated marketplace where investors can offer their shares for sale to other investors before the planned exit. Liquidity is not guaranteed — it depends on buyer interest and pricing.

Cost basis: The amount you originally paid for your shares. Capital gains tax is calculated on the difference between the sale proceeds and your cost basis.

Withholding tax: Tax deducted at source by the SPV (or the jurisdiction in which it sits) before distributions reach you, common in cross-border investing. You may be able to claim a foreign-tax credit to avoid double taxation.

These terms are a starting point. When you encounter a term you do not recognise on a property page or in a distribution notice, look it up or ask the platform — a credible platform will explain its terminology in plain language. See the dedicated article "Tax Concepts: A High-Level Overview" for more, and always consult a qualified tax professional for advice specific to your situation.