The decision, term by term.

Allocation

How you split capital across assets, markets and risks, on purpose. Most portfolios are not allocated; they are accumulated — the sum of separate yeses. Deciding allocation first turns each individual deal into a fit-or-not question rather than a temptation.

Base rate

How often this kind of bet actually works out, before you add your own story. Most people reason from the vivid particular — “this one is different”; the disciplined start from the general — “how often do these end well?” — and make the exception earn its optimism.

Basis (cost basis)

Everything the asset actually cost you to own — price plus taxes, fees, and the works needed to make it lettable. People fall in love with the sticker price and are surprised by the basis. Your return is measured against the basis, not the headline.

Cap rate (capitalisation rate)

Net operating income divided by price. It is the market’s opinion of an asset dressed up as a percentage: a low cap rate means people are paying up for perceived safety or growth; a high one means they want to be paid for risk. A cap rate is a question (“why this number here?”), not an answer.

Cash flow

What lands in your account after every bill, including the mortgage. Positive cash flow buys you patience; negative cash flow means the market has to bail you out on price. Most avoidable losses come from mistaking appreciation for cash flow.

Comparable (“comp”)

A recent, genuinely similar transaction used to price the one in front of you. The skill is not finding comps — it is knowing which differences (condition, floor, lease, timing) break the comparison. A bad comp is worse than none.

Conviction

The state of having turned information into a decision you can defend — and hold when the market disagrees. Information is cheap and endless; conviction is what you build from it. The whole point of a method is to reach conviction on purpose rather than by mood.

Cross-border investing

Buying in a market you do not live in. The added risks are not exotic — they are the ordinary ones (information, liquidity, currency, tax, enforcement) made harder because your instincts were trained somewhere else. The method matters more here, precisely because local feel is missing.

Currency risk

The chance that exchange-rate moves change your return even when the asset performs exactly as planned. For a cross-border investor it is a second, silent position sitting on top of the property. Ignoring it is choosing to be exposed to it.

Debt service coverage (DSCR)

How many times over the income covers the loan payments. Above a comfortable margin you have room; below it, a small slip in rent or rates turns a paper profit into a monthly emergency. Leverage is survivable only for as long as coverage holds.

Due diligence

The disciplined search for the reason not to buy. Its job is not to confirm your excitement but to find, before contracts, what would change your mind. Diligence you do after you have emotionally committed is theatre.

Four dimensions of risk

A way to break the fog of “this feels risky” into four questions: regulatory (can you own, hold and exit it — and what could change that?), financial (does the money work after the real costs?), operational (who runs it when you are not there?), and informational (what can you not see from outside, and who is filtering it for you?). Score each one honestly; the risk that hurts usually hides in the weakest.

Go / no-go

The moment the whole method exists for: turning everything you have gathered into a single, defensible yes, no, or not-yet. A framework that never forces the call only makes you better-informed while you hesitate — and a disciplined no is a real result, often the most profitable one.

Holding period

The length of time you actually own the asset — the denominator hidden under every return figure. “Twenty per cent” means nothing until you know whether it took one year or ten. Decide the horizon before the deal: it changes which risks matter and which you can simply outlast.

Incentives (the intermediary)

Almost everyone standing between you and the asset — agent, promoter, the helpful “local friend” — is paid on the transaction, not on your outcome. Their advice can be perfectly true and still not be for you. The first question is always: how does the person telling me this get paid?

Interest-rate risk

The chance that the cost of your borrowing rises after you commit. Cheap debt is not a permanent feature of a deal — it is a market condition that can leave. Stress the numbers at a higher rate before you sign, not after.

Leverage (gearing)

Using borrowed money to enlarge a position. Leverage multiplies the outcome in both directions: it turns good decisions into great ones and mediocre ones into losses. The question is never “how much can I borrow?” but “how much can I be wrong and still survive?”

Liquidity

How quickly you can turn the asset back into cash without cutting the price. Real estate is illiquid by nature; you are paid a premium for accepting that. Trouble arrives when you need liquidity the asset cannot give — which is a planning failure, not a market one.

Loan-to-value (LTV)

The loan as a share of the asset’s value. It measures your margin for error against a price fall. High LTV is cheap confidence; it feels free until values move.

Margin of safety

The gap between what you pay and what the asset is worth on conservative assumptions. It is what lets you be wrong — about rents, rates or timing — without being ruined. Buying at “fair value” leaves no room for the future to surprise you.

Market cycle

The long swing between fear and greed that carries prices, credit and construction with it. You cannot time it precisely, but you can know roughly where you are — and refuse the behaviour the top rewards and the bottom punishes.

Narrative vs. numbers

The tension between a good story and a good deal. Narrative moves prices; numbers pay you. The discipline is to enjoy the story while pricing the asset as if the story were untrue.

Opportunity cost

The best thing you did not do with the same money. Every yes is a silent no to every other use of that capital, so a deal is never “good” on its own — only better or worse than the one you passed up to take it.

Readiness

Being the best-informed person in the room before you commit, not after. It is not certainty — it is having asked the questions whose answers would have stopped you. A readiness check is cheaper than a mistake.

Risk-adjusted return

The return seen next to the uncertainty you took to get it. A higher headline return earned by taking far more risk is not a better decision — it is a different bet. Comparing returns without comparing the risks is how people talk themselves into the worst deals.

Sunk cost

Money and time already spent, which no future choice can bring back. It feels like a reason to keep going; it never is. The only honest question is whether the next euro earns its place from here — as if the spending so far had been someone else’s.

Tax (net of tax)

You keep what is left after tax, not what the asset earns — and across borders the tax on buying, holding, earning and leaving can all differ from the local’s. A return quoted before tax is a headline. The after-tax figure is the one you actually live on.

Total return

Income plus capital growth, over the whole holding period, after costs and tax. Judging a deal on yield alone, or on price growth alone, is judging half of it.

Valuation (market value)

A professional opinion of price at a given date, built on stated assumptions — not a fact, and not a forecast. A valuation is only as sound as the assumptions beneath it, so read those, not just the figure. A number with its assumptions hidden is a number with an agenda.

Void (vacancy)

Time when the asset earns nothing but still costs. Under-budgeting for voids is the most common way a “yielding” asset quietly stops yielding. Assume they happen; plan the cash flow that survives them.

Yield

What an asset pays you relative to its price, per year. Gross yield ignores costs and flatters everything; net yield — after voids, management, tax and maintenance — is the number you can actually spend. If someone quotes a yield without saying gross or net, assume gross and discount it.