Living on equity

Dazz · 17th Jan, 2011

See it is soooooo EASY! Can you do this??

As looooooooong as the Bank says yes. If they say no, you are blown out of the water.

SOLUTION: Approach reputable bank and ask for an 80% LOC facility against your total equity

Bank laughs at you at tells you to go away. After grovelling for a few months, they MAY look at 60%, but it will depend totally on your income....just provide all of your payslips for the past 2 years and we'll pass it through the Credit guys in the Sydney dark room.

Wait 3 months for answer. Nope - you present too high a risk. In fact, the borrowings you have appear to fall outside their standard credit guidelines (which changed yesterday - didn't we tell you that ??) and the Bank, instead of lending you more, would like to see you start paying down some of the principal component.

GULP.

You might be asking what happens at the end of the three years, when you have spent the money?? Well $2,200,000 of property growing at 5% pa = $110,000, which is MORE than you are spending each year, so at the end of the three years your properties will have grown by more than you have spent. You can then draw down the equity

.....if the Bank says yes. If in those 3 years, the whole world of credit and finance has been tipped on it's head, you are **** out of luck and heading out the back door.

Dust off that CV, pull on the suit and join the rat race again pal. Now that's what the Bank jockeys wanna see.

investor2009 · 17th Jan, 2011

Nice points Dazz!

It's amazing how different the CF investor is to the LOE type, the difference really is night and day and good to hear all sides, you can never be too careful as they say.

I possibly see these points (I do say 'possibly' but doubt it, doesn't mean this can't happen though) as valid, one must be ready for these possibilities short term if they want to LOE.

Personally, even through the credit crunch I had no hastle withdrawing funds to 80%, even though some on the forum did have these problems. If I 'was' refused credit I would have looked at switching institutions to one that would lend.

If the whole banking institutions lending criterea was tipped on it's head in the future, I would look at selling a property or two and parking this into CF investments using a safer, but lower yielding method. There are many options out, if you're in there in the first place and have the equity behind you to do so, but you have to be in there first.

I am LOE short term, but with the possibility of staying this way long term, the beauty is I can seitch paths if I need to, which is good to know And all part of the long term plan.

Dazz said:
As looooooooong as the Bank says yes. If they say no, you are blown out of the water.

Bank laughs at you at tells you to go away. After grovelling for a few months, they MAY look at 60%, but it will depend totally on your income....just provide all of your payslips for the past 2 years and we'll pass it through the Credit guys in the Sydney dark room.

Wait 3 months for answer. Nope - you present too high a risk. In fact, the borrowings you have appear to fall outside their standard credit guidelines (which changed yesterday - didn't we tell you that ??) and the Bank, instead of lending you more, would like to see you start paying down some of the principal component.

GULP.

.....if the Bank says yes. If in those 3 years, the whole world of credit and finance has been tipped on it's head, you are **** out of luck and heading out the back door.

Dust off that CV, pull on the suit and join the rat race again pal. Now that's what the Bank jockeys wanna see.

investor2009 · 17th Jan, 2011

Since the thread is generating good interest I'd like to post another classic discussion thread here http://www.somersoft.com/forums/showthread.php?t=32265

Dazz · 17th Jan, 2011

investor2009 said:
If the whole banking institutions lending criterea (sp) was tipped on it's head

I agree with you wholeheartedly, subject to you deleting the word "If" from the front of your sentence.

Dazz · 17th Jan, 2011

investor2009 said:
Nice points Dazz! It's amazing how different the CF investor is to the LOE type, the difference really...

.....boiling down to ;

CF investor gets their income from Tenants paying rent.

LOE type gets their income from the Bank saying "yes" to a bigger loan.

I'm just saying that this new Banking paradigm we are in, which is completely opposite to the world we were in when Navra was writing those wonderful posts, has a material impact on one of those groups.

VYBerlinaV8 · 17th Jan, 2011

zed_kid said:
Good plan VY. What about tax minimization? Off-shore accounts or a company that only turns a loss?

Good question. At this point, I'd figured on using property depreciation and franking credits to achieve tax minimization. Also, the assets will be split evenly between my wife and I, thus allowing for two tax free thresholds.

I figure I'll have to pay some tax, but that it won't be as much as if the money was from a working income. I'll investigate further going forward, but am conscious that I don't want to use rule-bending trickery. If I do make it to the goals I've set, I think I'll be able to enjoy a long and very comfortable 'retirement' even with some tax to be paid.

investor2009 · 17th Jan, 2011

Well yes, thats correct.

I don't agree with you on the whole banking institution being totally different now than it was 6 years ago. No worries though, you have your money and I have mine, thats what it's all about!

Peace out and enjoy your accomplishments, theres no need to defend them, I'm sure you're proud of what you've achieved

Dazz said:
.....boiling down to ;

CF investor gets their income from Tenants paying rent.

LOE type gets their income from the Bank saying "yes" to a bigger loan.

I'm just saying that this new Banking paradigm we are in, which is completely opposite to the world we were in when Navra was writing those wonderful posts, has a material impact on one of those groups.

yadreamin · 28th Jan, 2011

I was just wondering Where is Steve[Navra] now?
From memory didnt he set up some type of fund? if so hows that gone?
I also remember him leaving SS in quite a storm of words. Has anyone kept tabs on how his ideas have panned out in the past couple of turbulent years?
be interesting to hear whats happenend actually
cheers

investor2009 · 28th Jan, 2011

Good question, I spoke with him recently, and as far as I know the fund is doing really well, although I have no share in this. As far as LOE goes, the past 6-7 years have been just as he said they'd be in most areas and would have worked well for anyone who has/had jumped on the train.

yadreamin said:
I was just wondering Where is Steve[Navra] now?
From memory didnt he set up some type of fund? if so hows that gone?
I also remember him leaving SS in quite a storm of words. Has anyone kept tabs on how his ideas have panned out in the past couple of turbulent years?
be interesting to hear whats happenend actually
cheers

agent007 · 29th Jan, 2011

Dazz said:
We found LOR = LOE + 3 years

Hi Dazz,

Would you care explaining how you came up with this equation?

Thanks!

yadreamin · 31st Jan, 2011

investor2009 said:
Good question, I spoke with him recently, and as far as I know the fund is doing really well, although I have no share in this. As far as LOE goes, the past 6-7 years have been just as he said they'd be in most areas and would have worked well for anyone who has/had jumped on the train.

Thanks for the update investor 2009
Glad to hear all has gone to plan for him
cheers

oracle · 31st Jan, 2011

investor2009 said:
Good question, I spoke with him recently, and as far as I know the fund is doing really well, although I have no share in this. As far as LOE goes, the past 6-7 years have been just as he said they'd be in most areas and would have worked well for anyone who has/had jumped on the train.

Fund doing really well can mean a lot of things to a lot of people. Is there a more accurate definition on how well really well means? (Total shareholder return per annum for the past 5-8 years?).

Did Steve's funds comfortably beat the benchmark (All Ord Accum Index)??

Cheers,
Oracle.

oracle · 31st Jan, 2011

oracle said:
Fund doing really well can mean a lot of things to a lot of people. Is there a more accurate definition on how well really well means? (Total shareholder return per annum for the past 5-8 years?).

Did Steve's funds comfortably beat the benchmark (All Ord Accum Index)??

Cheers,
Oracle.

Just checked the following like which outlines Bluechip fund performance.

http://www.navrainvest.com.au/Navra_Blue_Chip_Australian_Share_Retail_Fund#performance_chart_NBCASRF

Am bit confused as to how the return is calculated. Whether dividends are re-invested or not?

So starting from May-03 to May-10 which is 7 years it says the fund performance was from 0% to 96%. How do I compare it against benchmark index and avg. annual compounded return?

Cheers,
Oracle.

oracle · 31st Jan, 2011

For anyone interested the following link shows the Return for Navra Blue Chip Aust Fund.

http://www.comparefunds.com.au/fund/NAV0001AU/

Just go to the "Historical Financial Year Performance" tab.

Year #.............Total............Growth............Income
2009-10............0.7%............-7.2%..............7.9%
2008-09...........-14.9%..........-18.2%............ 3.3%
2007-08...........-12.4%..........-21.1%............ 8.7%
2006-07...........20.8%............2.3%..............18.5%
2005-06...........19.3%............2.1%..............17.2%
2004-05...........22.5%............6.3%..............16.2%
2003-04...........11.6%............1.1%..............10.5%
2002-03...........-0.1%............0.0%..............-0.1%

Average: 7.8%

Total Compounded Return for All Ord Accum. Index between 2002-03 (15991) to 2009-10 (30415) - 7 year period was 9.62%

(PS: Sorry don't mean to hijack the thread. Mods let me know if you want me to put this info in a new post)

Cheers,
Oracle.

Marty McDonald · 31st Mar, 2011

One is investing one is speculating. Add value.

Intrinsic_Value · 31st Mar, 2011

oracle said:
For anyone interested the following link shows the Return for Navra Blue Chip Aust Fund.

http://www.comparefunds.com.au/fund/NAV0001AU/

Just go to the "Historical Financial Year Performance" tab.

Year #.............Total............Growth............Income
2009-10............0.7%............-7.2%..............7.9%
2008-09...........-14.9%..........-18.2%............ 3.3%
2007-08...........-12.4%..........-21.1%............ 8.7%
2006-07...........20.8%............2.3%..............18.5%
2005-06...........19.3%............2.1%..............17.2%
2004-05...........22.5%............6.3%..............16.2%
2003-04...........11.6%............1.1%..............10.5%
2002-03...........-0.1%............0.0%..............-0.1%

Average: 7.8%

Total Compounded Return for All Ord Accum. Index between 2002-03 (15991) to 2009-10 (30415) - 7 year period was 9.62%

(PS: Sorry don't mean to hijack the thread. Mods let me know if you want me to put this info in a new post)

Cheers,
Oracle.

And people wonder why i am always suggesting the use of Index Funds for passive investors.
Another under performer over longer periods.

Davede · 5th Apr, 2011

To get back on topic.

I've never personally lived off the equity in my investments simply because I don't need to.

However when I was with one particular financial planning firm there were many clients who used the equity in their property to fund their lifestyle expenses.

This was particularly attractive to them because of the tax effectiveness and because they could access the money without having to sell.

Also saw some people who went the opposite route - one had 4 properties, was on 300k a year from their job and then lost their job. Instead of living off the equity till they found a new one they sold 3 properties and incurred big capital gains tax.

Pays to listen to some professionals.

Rolf Latham · 6th Apr, 2011

Davede said:
Pays to listen to some professionals.

And sometimes not

ta
rolf

VYBerlinaV8 · 5th Jun, 2011

Davede said:
...one had 4 properties, was on 300k a year from their job and then lost their job. Instead of living off the equity till they found a new one they sold 3 properties and incurred big capital gains tax.

So the obvious questions is why not simply get another job, even if you need to take a paycut?

SENIOR · 5th Jun, 2011

I retired 4.5 years ago and at 60 I think I have done well
I only have 4 ips but bought them all over 10 years ago in good locations
The rents are giving me a pension but not outstanding returns and would be difficult to only rely on them to live
Using my SMSF as the main source of income
Eventialy I will start selling my ips as I bought them to use as a way to retire
So in my situation should I just keep my ips until im 80 and then give it to the children or should I be selfish and enjoy
I think you should have a plan whether using LOE or anything else.I make up
spreadsheets and am very consevitive. Its worked up to now
I dont buy BMWs at 50k instead I just bought a Hyundai i30 diseal drivaway new for 18.5 k
My wife and I always look for discounts and we are really enjoying our retirement

SENIOR

Living on equity

Living on equity

I have lived on equity for some sort of expense

I have not lived on equity before

I would use equity for lifestyle purposes IF I had the equity

I would NOY use equity to fund lifestyle expense if I had the ability

More options

Dazz

investor2009

investor2009

Dazz

Dazz

VYBerlinaV8

investor2009

yadreamin

investor2009

agent007

yadreamin

oracle

oracle

oracle

Marty McDonald

Intrinsic_Value

Davede

Rolf Latham

VYBerlinaV8

SENIOR

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