Discussion
sidicks said:
drainbrain said:
Making insufficient profit / income is probably the fundamental downside risk that the OP wants to avoid when enacting a strategy with his ma's cash.
Profit and income are entirely different things - no wonder you are confused!drainbrain said:
And in my opinion, the overarching downside risk of entering any business is that it makes insufficient profit- aka fails.
Yes, but that's not the main concern of the OP.Net Profit After Taxes
Net profit after taxes is the net income of the organization less all taxes. It is the sum of all revenues less all expenses, including cost of goods sold and all taxes. While it is almost the same as net income, this terminology frequently appears on the company’s financial statements in order to differentiate between profits before and after subtracting taxes.
Sid…seriously…don't give up the day job.
drainbrain said:
Oh yes, net profit and net income are sooooo different…..
Net Profit After Taxes
Net profit after taxes is the net income of the organization less all taxes. It is the sum of all revenues less all expenses, including cost of goods sold and all taxes. While it is almost the same as net income, this terminology frequently appears on the company’s financial statements in order to differentiate between profits before and after subtracting taxes.
Sid…seriously…don't give up the day job.
Seriously, you don't understand that for an individual that wants income like the OP there is a massive difference between profit and income?Net Profit After Taxes
Net profit after taxes is the net income of the organization less all taxes. It is the sum of all revenues less all expenses, including cost of goods sold and all taxes. While it is almost the same as net income, this terminology frequently appears on the company’s financial statements in order to differentiate between profits before and after subtracting taxes.
Sid…seriously…don't give up the day job.
(and the best you can do is provide an accounting definition of company profit to justify your mistake?)
I guess you've never heard of profitable companies going bankrupt due to lack of cashflow - "surely that must be impossible because (according to you) profit and income are basically the same....
Priceless
Edited by sidicks on Friday 26th August 21:15
Jockman said:
drainbrain said:
And in my opinion, the overarching downside risk of entering any business is that it makes insufficient profit- aka fails.
Cash flow 
However when the business makes unplanned losses (and I can't even imagine trying to explain to sid why one might plan a loss), or when it's profitable, but barely so, it's a fail. And a fail is what you risk whenever you try to do any business. You could call it the fundamental risk.
drainbrain said:
Yeah usually the choker. But sometimes survivable or get aroundable. And often caused by unforeseeable chains of events.
However when the business makes unplanned losses (and I can't even imagine trying to explain to sid why one might plan a loss), or when it's profitable, but barely so, it's a fail. And a fail is what you risk whenever you try to do any business. You could call it the fundamental risk.
Best you educate yourself on the differences between income and gains before you worry about my understanding!However when the business makes unplanned losses (and I can't even imagine trying to explain to sid why one might plan a loss), or when it's profitable, but barely so, it's a fail. And a fail is what you risk whenever you try to do any business. You could call it the fundamental risk.
sidicks said:
Seriously, you don't understand that for an individual that wants income like the OP there is a massive difference between profit and income?
(and the best you can do is provide an accounting definition of company profit to justify your mistake?)
I guess you've never heard of profitable companies going bankrupt due to lack of cashflow - "surely that must be impossible because (according to you) profit and income are basically the same....
Priceless
Hairsplitting and meaningless theoretical bibble babble. Except for the part about the accounting definition. Illustrates very clearly that MASSIVE difference between profit and income, doesn't it? lol….well, doesn't it? Well, no it doesn't does it? Pesky accountants. What would they know? (and the best you can do is provide an accounting definition of company profit to justify your mistake?)
I guess you've never heard of profitable companies going bankrupt due to lack of cashflow - "surely that must be impossible because (according to you) profit and income are basically the same....
Priceless
Edited by sidicks on Friday 26th August 21:15
Other than voluntarily, businesses don't go bankrupt because of lack of cash-flow because properly handled as it often is, poor cash-flow is a temporary problem. But making no profit? Well. Give it a try.
Now here's something else. It's Friday night and the Real World requires my attention.
Edited by drainbrain on Friday 26th August 21:50
drainbrain said:
Hairsplitting and meaningless theoretical bibble babble. Except for the part about the accounting definition. Illustrates very clearly that MASSIVE difference between profit and income, doesn't it? lol….well, doesn't it? Well, no it doesn't does it?
Other than voluntarily, businesses don't go bankrupt because of lack of cash-flow because properly handled as it often is, poor cash-flow is a temporary problem. But making no profit? Well. Give it a try.
Other than voluntarily, businesses don't go bankrupt because of lack of cash-flow because properly handled as it often is, poor cash-flow is a temporary problem. But making no profit? Well. Give it a try.
Any idiot can understand the difference between actual cash flow i.e. income and notional profit - try paying the bills with 'profit' but no income / cash flow.
Has the OP asked to maximise return / profit or to provide income?
You do understand that the OP is not a company, don't you?
sidicks said:
Any idiot can understand the difference between actual cash flow i.e. income and notional profit - try paying the bills with 'profit' but no income / cash flow.
Has the OP asked to maximise return / profit or to provide income?
You do understand that the OP is not a company, don't you?
Okay.
If the OP was to ask,' what profit per annum would I make from my property investment', I might answer 'the total of the rent you receive minus the operating expenses' .
If the OP was to ask 'what income per annum would I make from my property investment' I might answer 'the total of the rent you receive minus the operating expenses'.
What do you think the difference would be between the two answers?
Slowly now. Don't rush the answer.
Edited by drainbrain on Friday 26th August 22:13
drainbrain said:
Do you want to go back to 'take it slowly' again? One step at a time?
Okay.
If the OP was to ask,' what profit per annum would I make from my property investment', I might answer 'the total of the rent you receive minus the operating expenses' .
If the OP was to ask 'what income per annum would I make from my property investment' I might answer 'the total of the rent you receive minus the operating expenses'.
What do you think the difference would be between the two answers?
And if the property value fell 20% in year one, you'd still claim a 'profit' would you?Okay.
If the OP was to ask,' what profit per annum would I make from my property investment', I might answer 'the total of the rent you receive minus the operating expenses' .
If the OP was to ask 'what income per annum would I make from my property investment' I might answer 'the total of the rent you receive minus the operating expenses'.
What do you think the difference would be between the two answers?
If that's your target, I'm sure I can find loads of assets that provide you with high income but a capital loss!
Edited by sidicks on Friday 26th August 22:15
sidicks said:
And if the property value fell 20% in year one, you'd still claim a 'profit' would you?
LOL! On Monday I'm going to tell my accountant to try that one on the taxman!! How do you think HMRC's going to answer your (stupid) question? "come on, Mr Taxman! The portfolio's down valuing! Surely you're going to allow it as an expense against profit"??
Like I said, don't give up the day job.
drainbrain said:
LOL! On Monday I'm going to tell my accountant to try that one on the taxman!! How do you think HMRC's going to answer your (stupid) question?
"come on, Mr Taxman! The portfolio's down valuing! Surely you're going to allow it as an expense against profit"??
Like I said, don't give up the day job.
The OP is not a company."come on, Mr Taxman! The portfolio's down valuing! Surely you're going to allow it as an expense against profit"??
Like I said, don't give up the day job.
HTH
sidicks said:
And if the property value fell 20% in year one, you'd still claim a 'profit' would you?
If that's your target, I'm sure I can find loads of assets that provide you with high income but a capital loss!
My my. How did you know I need exactly that right now! Do you know why?? If that's your target, I'm sure I can find loads of assets that provide you with high income but a capital loss!
Edited by sidicks on Friday 26th August 22:15
And you've still not answered….why might you plan a loss? Especially (tho not exclusively) in property?
Sidicks... I have no idea how you keep going with him!
Have to say I agree with Walm - you have no idea what you are talking about when talking about risk. I am not an expert in financial risks or products, but do have a pretty good (practical) understanding of risk from my work.
Lets take your strategy and play it forward from 2000.
Prices of houses have been increasing for over 10 years. So Bob who had been building his housing empire from 1999 could safely tell Jenny that there was no risk to her buying houses because houses always go up in the long term. So Jenny bought a house. This went well, so she bought another a year or two later, then borrowed even more to get another house just after. So go forward a lot of years to 2003(?) and it's awesome. She's made 15% after inflation, and can easily go round telling everyone Bob was right and there is no risk to this game.
Fast forward a year or so. Housing price crashes and is now -5 to 10% of her buying prices. One of her regular renters lost their job, and the flat is sitting empty. In one of the other apartments it gets to the time where they need to fix the roof, so she has a big cost for that. During this time she has to also cover the loans and interest payments that she took out on these places. She basically gets screwed and so then decides to sell a place. So she puts it on the market but it takes time to sell. 2008 comes and the market crashes and she has to sell for -20% of what she paid for it.
Bob decided to do something different and so sold his places in 2002 in the end. So he pockets 30% increase after inflation plus the rental yields.
Both followed the same strategy. One got lucky, the other didn't. Massively different outcomes, and yet the risk picture was the same. How can any investment where you wipe out everything you own be called low risk?
There is a reason you earn more in some types of investments, and it's because you have higher risk. It's not just a random number in someone's head. If you take high risk you can reduce it to a certain extent, but when it comes down to it you either get lucky and get a high reward, or you can lose a lot/ everything. You got lucky, simple as that.
ETA: I used this graph. No idea how accurate it is, but it doesn't matter in terms of comparing the two very different outcomes from the same decision.
Have to say I agree with Walm - you have no idea what you are talking about when talking about risk. I am not an expert in financial risks or products, but do have a pretty good (practical) understanding of risk from my work.
Lets take your strategy and play it forward from 2000.
Prices of houses have been increasing for over 10 years. So Bob who had been building his housing empire from 1999 could safely tell Jenny that there was no risk to her buying houses because houses always go up in the long term. So Jenny bought a house. This went well, so she bought another a year or two later, then borrowed even more to get another house just after. So go forward a lot of years to 2003(?) and it's awesome. She's made 15% after inflation, and can easily go round telling everyone Bob was right and there is no risk to this game.
Fast forward a year or so. Housing price crashes and is now -5 to 10% of her buying prices. One of her regular renters lost their job, and the flat is sitting empty. In one of the other apartments it gets to the time where they need to fix the roof, so she has a big cost for that. During this time she has to also cover the loans and interest payments that she took out on these places. She basically gets screwed and so then decides to sell a place. So she puts it on the market but it takes time to sell. 2008 comes and the market crashes and she has to sell for -20% of what she paid for it.
Bob decided to do something different and so sold his places in 2002 in the end. So he pockets 30% increase after inflation plus the rental yields.
Both followed the same strategy. One got lucky, the other didn't. Massively different outcomes, and yet the risk picture was the same. How can any investment where you wipe out everything you own be called low risk?
There is a reason you earn more in some types of investments, and it's because you have higher risk. It's not just a random number in someone's head. If you take high risk you can reduce it to a certain extent, but when it comes down to it you either get lucky and get a high reward, or you can lose a lot/ everything. You got lucky, simple as that.
ETA: I used this graph. No idea how accurate it is, but it doesn't matter in terms of comparing the two very different outcomes from the same decision.
Edited by NRS on Friday 26th August 22:56
NRS said:
Sidicks... I have no idea how you keep going with him!
Have to say I agree with Walm - you have no idea what you are talking about when talking about risk. I am not an expert in financial risks or products, but do have a pretty good (practical) understanding of risk from my work.
Lets take your strategy and play it forward from 2000.
…..and having got that out of his system it then lurches into a ridiculous and really juvenile fantasy about a woman who did almost everything you could do wrong in btl land, plus got badly advised, plus got seriously unlucky and STILL managed to come out with 80% of her ass……then drops in a meaningless Mr Theory type graph about a non-existent theoretical concept called "The Uk Property Market"……
]
NRS: It's six o'clock on Saturday morning and I've just woken up bolt upright and experienced a moment of Meaningful Insight! Really! And I've got you to thank for it, so ….thank you!Have to say I agree with Walm - you have no idea what you are talking about when talking about risk. I am not an expert in financial risks or products, but do have a pretty good (practical) understanding of risk from my work.
Lets take your strategy and play it forward from 2000.
…..and having got that out of his system it then lurches into a ridiculous and really juvenile fantasy about a woman who did almost everything you could do wrong in btl land, plus got badly advised, plus got seriously unlucky and STILL managed to come out with 80% of her ass……then drops in a meaningless Mr Theory type graph about a non-existent theoretical concept called "The Uk Property Market"……
]
I actually wrote a response to your silly twaddle at 1 am, but the subsequent Meaningful Insight's meant it's much better deleted and replaced with this.
I've had these moments a few times in my life. Last time was at a football match 4 or 5 years ago. The crowd's on its feet! Fury on the faces! Real tangible hate. And horrendous abuse being screamed at the opposition fans 50/60 yards away! And suddenly I'm in this Quiet Space….completely isolated from all the roaring madness going on all around. And a voice…my voice…the insight inside my head…says to me "WHAT THE FEKK ARE YOU DOING HERE"???? And now I'm looking at the grotesques around me, and they're like aliens from outer space or like attack zombies who've somehow gathered me into their ranks and I'm turning into one too…..and suddenly I've seen it as though I'm an observer rather than a part of it…..and wow! It's like an Escape Route's opened up…..
Well, my friend, I'm pretty sure your silly post has triggered this one. It's not that it's really much sillier than many of the others, but it's kicked open the door marked "What the fekk am I doing here"???
Run Forrest, Run!!
lol!!
Thank you NRS! And you're right! I AM lucky. Very lucky. Almost got stuck on the bad side of a Walking Dead episode in virtual reality but now it's back to that lucky lucky life and you know the best thing about it? It's in Real Reality!!
YAY!!!
https://uk.video.search.yahoo.com/search/video;_yl...
hahaha!! I've escaped, you fukkers!
Edited by drainbrain on Saturday 27th August 06:36
It is a very simplified story, and in many ways a lot of nonsense. However how would you remove the risks in your BTL world that would make it very low risk?
You cannot be sure where you are buying in a market cycle. You can reduce risk by not buying when it is high. Yet these days prices are looking a bit toppy, and you advised to OP on this strategy now? In a crash the rental prices will also go down and may not cover the cost of the mortgage payments.
If you do buy at the wrong time the fall in house price could easily be enough to wipe out your gains from rental income.
You cannot be sure of keeping people in the houses at all times. If you cannot afford the payments you may be forced to sell, thus realising any loss on the house at the time.
You cannot be sure where you are buying in a market cycle. You can reduce risk by not buying when it is high. Yet these days prices are looking a bit toppy, and you advised to OP on this strategy now? In a crash the rental prices will also go down and may not cover the cost of the mortgage payments.
If you do buy at the wrong time the fall in house price could easily be enough to wipe out your gains from rental income.
You cannot be sure of keeping people in the houses at all times. If you cannot afford the payments you may be forced to sell, thus realising any loss on the house at the time.
WOW, I got interested in this thread as I was thinking of cashing in some unit trusts that are in a high risk (tax free) fund but have performed +76% in the last 10yrs and I'm thinking they may have peaked. Having 'cash on the hip' with such derisory interest rates isnt the best option given that I dont need access at this time and I thought property might be the solution. I'm thinking of leaving it where it is now................
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