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  1. #11491
    Missed by that much
    Join Date
    Jan 2014


    Quote Originally Posted by Snoopy View Post

    'Building scale' is all about growing the size of the reverse mortgage portfolio. Growing the REL portfolio means that HBL will always have poor cashflow, because as 100 loans are paid back in the future (say), Heartland will have to fund 200 new equivalent loans to keep the growth going. So I see no end to the cashflow issue, provided the REL portfolio keeps growing.....

    I think you may be treating this issue as too much of binary situation rather than as a variable scale. Inflation alone would mean that simply replacing 100 matured loans with 100 new ones that there would be growth in absolute terms, not not in real terms, however the cashflow would be the equivalent of the compounded interest over the period of those loans. Increasing the number or value of loans by an amount equal to say half of the cash generated would achieve both cashflow and growth.

  2. #11492
    Join Date
    Jun 2004
    , , New Zealand.


    Quote Originally Posted by percy View Post
    Bit like the problems Warren Buffett's Berkshire Hathaway would have had, if they had started paying dividends years ago.!!
    Good sort of problem to have.
    If you take the example of 'Berkshire Hathaways'' insurance business, then what we have compared with Heartland's REL business is exactly the opposite. Berkshire accepts cash up front in insurance premiums, in the hope they won't have to pay it out later. Heartland takes on a property debt up front and hope that they will get paid back later.

    Warren takes the insurance premiums and uses that free cashflow to invest in all sorts of other businesses.

    Heartland takes on the immediate cashflow obligation, then has to scratch around to find the money to pay it.

    The two comparative business models are polar opposites from a cashflow perspective.

    Think it is best understood by those who understand how compound interest works...…………….lol.
    Compound interest will certainly mean more 'cash back' to Heartland once those reverse mortgages are discharged to be sure. But it will do nothing to improve cashflow in the interim for Heartland shareholders.

    Last edited by Snoopy; Today at 02:50 PM.
    Management top tip: Share the responsibility. Change your name by deed-poll to "Someone Else"

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