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drhewitt

Profit Realized?

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I'm still new to this forum and house prices in general.

Can someone explain to me how profit is realized when a properties value goes up without selling their home.

I hear about massive house price rises, but people who are not BTL and are just regular mortgage payers, how do they realize their profit?

If they trade up to a bigger home, likely the difference in value between their home and the next will be larger than whatever profit they've made, and anoter loan is taken out.

I have a friend who lives in North Bersted, Bognor, they wanted to move to Cornwall but they can't get the price they would like for their home, also, the houses in Cornwall are more expensive than Bognor.

It seems to me, that unless you're in BTL, the only way to realize a profit is to sell your home and rent and put the proceeds in a bank. Not many people would do that.

What's my point? Your house may have gone up in value, but you don't really see that profit till you either sell and rent or sell and move to a smaller, cheaper, dwelling.

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What's my point? Your house may have gone up in value, but you don't really see that profit till you either sell and rent or sell and move to a smaller, cheaper, dwelling.

Agreed. It's all just a paper profit. Similarly, if prices fall, it's just a paper loss.

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Guest Baffled_by_it_all

Yes, but a paper loss is more significant if you're forced to sell due to a change in circumstances. Particularly if you have a huge mortgage.

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Exactly. Its the same as any market.

You only make a profit (usually measured in local Fiat currency - £s for exmaple) when you cash back out into £s.

To do that in owner occupied housing you can:

  • Downsize
  • Sell to Rent (STR)
  • Emmigrate
  • Die

If you are buying another house then you will not be exiting the market.

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MEW of corse :lol:

You and I however are in the minority in this country who would first have to pay a suregeon to remove the part of the brain that deals with common sense and worrying about how you will repay the money. - something lacking in most of the population.

Having taken out a huge loan against the new higher value of your house, Bought a Plasma screen TV, a 4x4 and possibly a holiday home in spain, you will be considerably richer than you were before.

Its that simple. You are really stupid if you dont understand Gordons miricle economy we now live in.

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Agreed. It's all just a paper profit. Similarly, if prices fall, it's just a paper loss.

If prices fall?

But house prices can only ever go up - surely? ;)

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MEW of corse :lol:

You and I however are in the minority in this country who would first have to pay a suregeon to remove the part of the brain that deals with common sense and worrying about how you will repay the money. - something lacking in most of the population.

Having taken out a huge loan against the new higher value of your house, Bought a Plasma screen TV, a 4x4 and possibly a holiday home in spain, you will be considerably richer than you were before.

Its that simple. You are really stupid if you dont understand Gordons miricle economy we now live in.

drhewitt lives in the US and thus doesn't know what's really going on over here.

As mercenarul says, an amazing number of people in the UK are under the mistaken impression that to 'realise the profit' in their house is to MEW (mortgage equity withdrawal) up to the current 'market value'. They massive increase their mortgage because IRs will remain at their historically low levels for the next few decades. People use IO mortgages becase the silly notion that one should repay a loan has been nullified by the new 'prices only go up' paradigm. It's so certain that prices will only ever go up that they don't even need a repayment vehicle for the capital.

This 'released equity' is then blown on holidays, shiny (incrediably fast depreciating) consumer items from Germany and Asia, etc. Many BTL speculators use this 'released equity' (money borrowed off the bank) to borrow more money off the bank to further invest in property. The whole pyramid scheme continues.

That's how you profit from property rises in the UK!!! At the top of the scheme is Gordon Brown, who is desparate to become prime minister ASAP so that he can call a snap election ASAP so he can try & lock himself into Downing Street for 4 years before the payback starts.

drhewitt, a big question, but what do you think the effects of appointing the head of GS as the head of the US treasury will be on US economic policy?

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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