adrianc
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Post by adrianc on Dec 21, 2021 8:51:34 GMT
For example I bought a property 6 years ago and it has doubled in value That says to me that now is a time to sell, not a time to buy. What's your net post-tax yield against that current value?
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Dec 21, 2021 9:20:34 GMT
I see financial repression coming
That sounds like something nasty! What exactly is it?
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foolsgold
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Post by foolsgold on Dec 21, 2021 10:00:57 GMT
For example I bought a property 6 years ago and it has doubled in value That says to me that now is a time to sell, not a time to buy. What's your net post-tax yield against that current value? ROI on investment is infinite as Ive got all my original investment out and since remortgaging ive now released more than the 25 percent equity on deposit to purchase a BTL mortgage a new property.Ive done the same with others and this one isnt just a one off
I very rarely sell any properties and hold long term.Properties mostly double over long periods of time so why would you want to sell and give up an infinite yield?...where would I put my cash released? I certainly would want to be holding cash at the moment....I already invest into investment trusts and have done very well with them.
Where do you invest your cash?
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Post by Deleted on Dec 21, 2021 10:14:18 GMT
It depends where you are in your life cycle. I hold cash as cash. I hold investments. I don't confuse the two things.
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adrianc
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Post by adrianc on Dec 21, 2021 10:24:18 GMT
That says to me that now is a time to sell, not a time to buy. What's your net post-tax yield against that current value? ROI on investment is infinite as Ive got all my original investment out and since remortgaging ive now released more than the 25 percent equity on deposit to purchase a BTL mortgage a new property.Ive done the same with others and this one isnt just a one off No, it's not. Because that property still has value, which you could be investing elsewhere for a better return.
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foolsgold
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Post by foolsgold on Dec 21, 2021 14:52:22 GMT
ROI on investment is infinite as Ive got all my original investment out and since remortgaging ive now released more than the 25 percent equity on deposit to purchase a BTL mortgage a new property.Ive done the same with others and this one isnt just a one off No, it's not. Because that property still has value, which you could be investing elsewhere for a better return. I see what you are asking.
If I had sold it paid off the existing mortage and taken profit rather than mortgaging it then the cash would have to earn at least 14 percent before it would exceed what my return is on property. However if I left it invested in property then the value of the property should go up long term adding more to the hypothetical return. Where could I earn a better return for a similar risk ? where do you invest in to get a better return than 14 percent base?
I have used the power of leverage using borrowed money in a low interest environment to aquire more properties to make a profit on rental properties that I otherwise wouldnt have made if I hadnt invested in property.
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adrianc
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Post by adrianc on Dec 21, 2021 17:50:40 GMT
No, it's not. Because that property still has value, which you could be investing elsewhere for a better return. I see what you are asking.
If I had sold it paid off the existing mortage and taken profit rather than mortgaging it then the cash would have to earn at least 14 percent before it would exceed what my return is on property. However if I left it invested in property then the value of the property should go up long term adding more to the hypothetical return. Where could I earn a better return for a similar risk ? where do you invest in to get a better return than 14 percent base?
I have used the power of leverage using borrowed money in a low interest environment to aquire more properties to make a profit on rental properties that I otherwise wouldnt have made if I hadnt invested in property.
No, you're still missing the question... If the house is now worth £150k, and you're getting £4k post-tax profit this year, then you'd be getting 2.7% yield on your investment this year. So...
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foolsgold
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Post by foolsgold on Dec 21, 2021 18:13:03 GMT
I see what you are asking.
If I had sold it paid off the existing mortage and taken profit rather than mortgaging it then the cash would have to earn at least 14 percent before it would exceed what my return is on property. However if I left it invested in property then the value of the property should go up long term adding more to the hypothetical return. Where could I earn a better return for a similar risk ? where do you invest in to get a better return than 14 percent base?
I have used the power of leverage using borrowed money in a low interest environment to aquire more properties to make a profit on rental properties that I otherwise wouldnt have made if I hadnt invested in property.
No, you're still missing the question... If the house is now worth £150k, and you're getting £4k post-tax profit this year, then you'd be getting 2.7% yield on your investment this year. So... So ....where do you invest your money then ?.....
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tallsuk
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Post by tallsuk on Jan 2, 2022 13:14:00 GMT
Unfortunately, I don’t think there is a standard definition of ROI, and it means different things to different people. In property I understand it to mean the return on any initial capital used. That can then be returned relatively quickly through a combination of good purchasing, house price inflation, rent, adding value through renovations etc. Once the initial capital is returned then the ROI can be infinite. However, more traditional investors would look at the fact that there is still value in the asset could be crystalised by selling it and therefore see this as a cost of equity. I don’t think either is right or wrong just different.
The problem with trying to calculate risk and return in property is that it is a 20+ year investment which therefore means that trying to use annualised figures over 10 years can easily be misleading. It is difficult to compare stocks and shares to property accurately.
Personally, I am very interested in property investment, but I do think that that the market is massively overheated and that higher interest rates are going to have serious consequences. It means that I am holding more cash that I would like but I happier taking a bit more of a hit on that upfront for the benefit of having cash when the market goes the other way.
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tallsuk
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Post by tallsuk on Jan 2, 2022 13:22:24 GMT
I see financial repression coming
That sounds like something nasty! What exactly is it? I am pretty sure there is a recognised high level definition of this, but I think it is when the government makes rules that indirectly get it out of trouble at the cost of taxpayers. Giving below inflation pay rises to public sector works which encourages the private sector to do the same for example. One that is currently relevant, is keeping saving interest rates artificially low whilst letting inflation run high as public debt can be eroded quickly this way. Unfortunately, this means rewarding the sinners and punishing the virtuous (if you think saving is virtuous).
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Post by Deleted on Jan 2, 2022 13:30:11 GMT
Unfortunately, I don’t think there is a standard definition of ROI
and yet there are some pretty clear guidelines and papers that cover the subject pretty well and certainly at the level we are discussing it is pretty well sorted.
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tallsuk
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Post by tallsuk on Jan 2, 2022 13:36:07 GMT
Unfortunately, I don’t think there is a standard definition of ROI
and yet there are some pretty clear guidelines and papers that cover the subject pretty well and certainly at the level we are discussing it is pretty well sorted.
So which of the two examples I gave were right and which were wrong?
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Post by Deleted on Jan 2, 2022 14:47:31 GMT
crossed communication, I propose you read up on the subject, you propose I mark your working. Since I don't care about the multiple specifications of ROI (it not being a subject I have any interest in despite a few qualifications in finance) the second is not going to happen. That you don't want to really know the vast body of work that covers this pretty well the first isn't going to happen.
Makes sense to me :-)
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adrianc
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Post by adrianc on Jan 2, 2022 17:59:38 GMT
Surely, it all depends on what you want to calculate the RoI for.
If you want to see how well your investment has done historically, then you want to consider the value at the time of purchase.
If you want to decide whether to continue with a current investment, or liquidate and reinvest elsewhere, then you want to consider the current value.
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zlb
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Post by zlb on Jan 3, 2022 21:06:20 GMT
That sounds like something nasty! What exactly is it? I am pretty sure there is a recognised high level definition of this, but I think it is when the government makes rules that indirectly get it out of trouble at the cost of taxpayers. Giving below inflation pay rises to public sector works which encourages the private sector to do the same for example. One that is currently relevant, is keeping saving interest rates artificially low whilst letting inflation run high as public debt can be eroded quickly this way. Unfortunately, this means rewarding the sinners and punishing the virtuous (if you think saving is virtuous). having had below inflation pay increase since 1990 in a hidden part of the public sector - they've created massive reduction in the standard of living in those people. Also, I can see a different manipulation here. Give 1% max to the people who will make the least noise, and 5% to the parts of the public sector which are noted in the press.
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