Reply to: You know there's a property crash coming when...

[Fleetwood]

Thanks for that, expat.
I'll be a little more tolerant with them in future.
Any reason for their inability to pronounce "Caribbean"?

[expat]

These septics and the "English" they use really do piss me off.
Their inability to pronounce "aluminium" properly does my head in.

In 1808, Humphry Davy originally proposed the name alumium while trying to isolate the new metal electrolytically from the mineral alumina. In 1812 he changed the name to aluminum to match its Latin root. The same year, an anonymous contributor to the Quarterly Review objected to aluminum, and proposed the name aluminium.

"Aluminium, for so we shall take the liberty of writing the word, in preference to aluminum, which has a less classical sound. (Q. Review VIII. 72, 1812)"

-- Wikipedia

So it was called Aluminum, but some guy insisted on calling it something different because he thought it sounded better.

[frugalista]

Hello folks,

You can find out more about the coming UK property crash at

housepricecrash.co.uk

frugalista

[NoddY]

British Land portfolio bags £300m

British Land portfolio bags £300m

"Property investment group British Land is to sell its residential portfolio in a multi-million pound deal."

http://news.bbc.co.uk/1/hi/business/4733406.stm


Mmmm....interesting.

[threaded]

hear

[Joe Black]

And a virtual beer on me as well...



Sorry it's not the best brand, but I'm having to cut back after being told what my dentist's gonna charge me...

[Fleetwood]

Santé

[BlasterBates]

Well done Fleety, a "virtual" beer on me.

[Fleetwood]

Primarily working....

[milanbenes]

excellent, glad to here (did that mistake just to keep you happy),
you're back in work, this place has been dying these last few months

bring some life back to the forum, is it a surfing contract or a working contract ?

Milan.

[Fleetwood]

Back in Brussels for 6 monther, perhaps 9
Rate and contract OK, not brilliant, but after four months on the bench, you can't be too choosy....

[milanbenes]

how are you doing Fleet ?

what's new ?

Milan.

[Fleetwood]

These septics and the "English" they use really do piss me off.
Their inability to pronounce "aluminium" properly does my head in.

[vetran]

Overextended

Overleverage suggests you have a lever that is too large, however overextended suggests the line of credit you have been extended is larger than sensible.

These Americans they can't talk the Queens English. Fleety jump in any time.

[IR35 Avoider]

Insolvent and over-leveraged are not the same thing. As far as I know Millard is not insolvent, her property assets are worth more than the sum total of her debts. She's just taking far more risk than she understands, and is risking falling off the edge of the cliff at any moment.

If I am worth £0 and manage to borrow £1 million to invest in property then (assuming no transaction costs) my net worth is still £0. I am not insolvent, but I am over-leveraged. If property falls 1% my net worth then becomes minus £10K. If the loan terms do not allow the loan to be called in early and I can generate enough income from the property to meet the interest payments, and the downturn is only temporary, I don't have a problem. On the other hand, if (as is much more likely) the loan can be called in at the discretion of the lender or when it is not covered by the assets, then I am up a creek...

Whenever you borrow to invest you take a risk that you will be wiped out during a temporary down-turn in the market. This is one of the reasons why almost everyone with an account with a derivatives broker or spread-betting company ends up losing money. (Trading in derivatives is often equivalent to investing with borrowed money.) Even if people have a strategy that will win in the long term, volatility ensures that they get wiped out during a temporary down-turn after which they are out of the game; the long-term never arrives. That is why leverage is dangerous.

I get the impression that people investing in property think they are doing well if they only borrow 75% of the value of the property. Speaking for myself, I recently shifted my ISA savings into funds that own commercial property, and am extremely uncomfortable that one of them is allowed to borrow as much as 50% of the portfolio value. One third or less is the norm for the rest. Ideally I would prefer to invest in funds that don't borrow at all, as I believe that borrowing always worsens the risk/reward ratio. (Most investors only look at rewards, which is why fund managers can get away with using gearing.)