Know the Numbers

[Rosco]

It's still amazing how the media and others get the numbers so wrong.

Just saw;

Trader made $87,500

Purchased for $463,000, spent $33,000 on reno and sold for $583,500.

Is there something missing here?

			Incl GST		Excl GST
INCOME
Sale of Property			583,500
Less GST - Divide by 23 * 3			76,109
					507,391
EXPENSES
Purchase			463,000
Commission on sale			20,131
Legal - $1,000 to buy and $1,000 to sell			2,000
Accounting			500
Advertising - Agent or other			1,500
Insurance for 3 months			200
Rates - 3 Months			500
Renovations			33,000
Telephone			25
Travel - 86 cents per km * 300			260
Subtotal Expenses			521,116
Less GST			67,972
Subtotal Excluding GST					453,144
Less Loan Fee - NO GST					1,000
Less Interest 3 months @5%					3,125
TAXABLE PROFIT					50,122
Less Tax at 33%					16,540
NET PROFIT AFTER TAX (CASH AT END)					$33,582

Obviously I have made up the numbers, and there might not be commission for example. But this shows how $87,500 can drop quickly down to $50,122 before tax!

Still really good profit!

Ross

[PTILoveYou]

That's why buy and hold is gold.

Investor keeps ALL the gains

[Frezzinghot]

Hi Rosco,

Is there a good profit/loss excel file I can have to help me work through the numbers, I am looking to do some more trading but have not done some for a while.

FH

[Damap]

If you can't net 50K you should never touch a trade.

[Damap]

And speaking of media getting it wrong the head of QV was on ZB today saying over 2000 homes in Auckland changed hands more than once in a 12 month period which was undoubtedly due to "traders getting in before they had to pay tax after October 1".
So here is someone in the industry so clueless it beggars belief. Traders pay tax already blah, blah.

[Rosco]

That's why buy and hold is gold.

Investor keeps ALL the gains

Sometimes trading can help a buy and hold strategy.

For example, say you traded 2 properties per year in 08,09 and 10, and this extra cashflow enabled you to buy 4 extra long term hold properties in this same period, all in Auckland. These extra long term holds might have gone from $500k value to $800k value from purchase to now, and could all be cashflow neutral as you put in some cash at the start.

Generally buy and hold investors run out of steam. They either run out of equity or run out of cashflow, so get to a point where they can't buy any more and stagnate for a year or two. So extra cashflow from trading can really help with this.

I'm not saying everyone should trade, but trading does have it's place for some.

Ross

[Frezzinghot]

If you can't net 50K you should never touch a trade.

Yes thats what I am looking at, just wanted a simple spreadsheet to quickly punch the numbers.

[Damap]

Trading spreadsheet? PM me your email I'll send you mine.

[Frezzinghot]

The thing i really like about trading is the ability to use the cash in whatever way you want. you could pay off your home loan, use it to buy a new BMW (not recommended) or to leave your employer. These things are done at a much slower rate if you buy & hold. I believe if you can do both well you are on your way.

I have been advised that both are very different beasts!!

FH

[Frezzinghot]

Trading spreadsheet? PM me your email I'll send you mine.

Sweet, cheers!

[Damap]

I have always taught that they are 2 totally different things. Trading is a job, nothing to do with investment. You can trade anything it doesn't have to be houses. I would prefer to trade cars as I like cars more but houses are easier.

Buy and hold on the other hand is an investment, wealth creation strategy. Simple as that.

[Frezzinghot]

I have always taught that they are 2 totally different things. Trading is a job, nothing to do with investment. You can trade anything it doesn't have to be houses. I would prefer to trade cars as I like cars more but houses are easier.

Buy and hold on the other hand is an investment, wealth creation strategy. Simple as that.

I would have to agree, WHEN I make it full-time, I will have traded my current Job for another, I don't mind this, I would even be happy just to replace my current income for a full time traders income. B & H can at times be boring sitting and watching it grow. Biggest thing I have learnt though is I had wished I had never sold any at all. Bet we heard that one before!

FH

[Wayne]

Hi Rosco,

Is there a good profit/loss excel file I can have to help me work through the numbers, I am looking to do some more trading but have not done some for a while.

FH

Turn what Rosco put above into a xls.

[Wayne]

That's why buy and hold is gold.

Investor keeps ALL the gains

No sale - no gain.
Well not one you can buy the daily bread with.

[donna]

If you can't net 50K you should never touch a trade.

Really? Why is that? What if you do net $50K per month but it came from two trades? Are you saying there is a magic net number per trade? What if you're working full time and you do net $40K per month property trading - what's wrong with that Dean?

cheers,

Donna