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JohnG

How Much Has This Guy Lost?

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

his loss was actually a huge profit of over a hundred thousand pounds or am I missing something?

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

No loss, because he managed to sell it at the right price £60k less than what he thought he could get away with...well done. ;)

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

MEWed God knows how much last April, hence the valuation. Lost the lot.

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I concur with Winkie.

I personally bought (again) in 2000 for £93k, sold perhaps too early and slightly too cheaply for £185k in early 2006. Can someone work out my loss aswell please ;)

Edited by Rover

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

Insufficient data to calculate.

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Not as much as Joe Lewis who paid $107 for bear stearns shares, today valued at $2, still whats $800,000,000 in this day and age, pop it onto the plastic or Mew ;)

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No prizes for the correct answer, here's the scenario -

Bought 1997 for £90,000

Valued last April at £275,000

Went on the market last August for £285,000

October 'repriced' to £260,000

Just sold to 'cash buyer' type company for £225,000.

What was his loss? Please show your workings.

Depends wether he has taken any MEW during that period for a new TV, holyday or new car etc (all of the essentials).

If he hasnt taken any MEW, its a 135k profit.

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MEWed God knows how much last April, hence the valuation. Lost the lot.

Yeah looks like a mew 10% of £275K = 27.5K equity left in property owes £247.5K mortgage

sold £225K still owes £21.5K and loses whatever equity he put in 1997 say 10% = 9K

loss = 30.5k might be more if he bought at higher LTV in 1997.

Depends what he did with the MEW then, if he reinvested then it dominoes time, if he spent it well you could count it as profit.

Edited by CrashInHand

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What was his loss ?

Probably mewed his way up to a much higher outstanding mortgage with much larger repayments and then lost his job. Why would he sell at a "loss" to a BMV company unless he had to? That's what I reckon anyway :)

Edit: Just seen I've mis-read the question slightly. Oh well, maybe that'll teach me not to jump in so quickly :(

Edited by narrowescape

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Opportunity cost of £90,000 = £90,000 x 1.04^10 = £133,222 (assuming 4% average net savings interest rate)

So his gain is £225k - £133,222 = just under £92k.

But you should also subtract his mortgage interest payments, DIY (including time) and maintenance costs, buying and selling fees, but add on the cost of renting the equivalent place.

Probably made about £5-6k p.a. for sitting on his ar$e.

Next question: who paid for his gain?

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Gross profit = £135,000

Net profit = ?

To know the second figure you'd need to know to know about any debt repayments, transaction costs, cost of improvements, plus some people might want to include general maintainance costs as well.

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Why is MEW relevant to the profit calculation?

Because if he bought for 90k with a 90k mortgage, anything above that value he sells for is a gross profit.

If he remortgaged and took out equity at a value of 150k say, he could have withdrawn upto 60k worth of equity....making any profit 60k less....ish....

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so can I check, with these numbers, basically buying low when IRs are high, vs buying high when IRs are low.

so I suppose buying a house might, in quite a few circumstances, turn a profit given a bit of patience? is patience really that good?

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Guest mSparks
Because if he bought for 90k with a 90k mortgage, anything above that value he sells for is a gross profit.

If he remortgaged and took out equity at a value of 150k say, he could have withdrawn upto 60k worth of equity....making any profit 60k less....ish....

thats just, well plain wrong....

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Probably...the reason being I don't really care whether he made / lost / or has donated the profit and a kidney to charity.

This thread is pointless :rolleyes: Is someone trying to make the point that he made no profit because he MEWed it? He still made the profit even if he did, he just spent it already. That's pretty much what money is for - buying stuff. :P

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is this a second property? If so you will need to factor in capital gains tax, in addition to any MEW/the cost of doing the place up/costs over the years, income over the years, if this was BTL and had no tenants for n years and required alot of work he would have lost. The OP didnt give us enough facts to give a total profit/total loss over the years, thread is pointless without facts...

Edited by moosetea

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  • 295 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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