Listed property trusts

[Amanda81]

Hi all,

I'm sure there are quite a few people out there who have seen Peter Spann speak. He has mentioned taking out a loan (I think he specificially mentioned Westpac) for Listed Property Trusts, and using the cashflow this spins off to pay for negative gearing on your IPs.

Is there anyone out there actually using this strategy who can shed some more light on it?

Thanks,

Amanda.

 

[House_Keeper]

Property Trust will returns an income of about 7%.

You need to have some capital though.

Let's say you have 100K of capital.

Margin Lend with a 50% LVR: buy 200k of property trusts.

Annual income: 14k

Annual interest on margin loan (8%): 8k

That gives you 6k of income to pay off a negatively geared IP.

Over time, the income from property trusts go up, which makes the situation even better.

Cheers,

 

[The Y-man]

Property Trust will returns an income of about 7%.

You need to have some capital though.

Let's say you have 100K of capital.

Margin Lend with a 50% LVR: buy 200k of property trusts.

Annual income: 14k

Annual interest on margin loan (8%): 8k

That gives you 6k of income to pay off a negatively geared IP.

Over time, the income from property trusts go up, which makes the situation even better.

Cheers,

Ummm..... that won't work. You might as well NOT margin and get $7k per year???

Cheers,

The Y-man

 

[geoffw]

Peter was talking about a trust returning 9% income, which has shown an average 11% growth over a number of years. The income stuff is CF+ if you leverage; the growth is a nice bonus.

 

[redwing]

How are LPT's Currently Performing, I heard the Outlook for them was not as good as it has been in the past?

 

[The Y-man]

Very broad brush generalized perception from my eyes....

Listed Prop Trusts ( LPT) are probably doing 7%-8%
Unlisted trusts are doing around 9%-12%

Future depends a lot on tentants - no business, no tenants as general rule of thumb - hence Gov depts, and big multi-nationals on long leases are higly sought.

Hope this gives some ideas.

Cheers,

The Y-man

 

[Trogdor]

Ummm..... that won't work. You might as well NOT margin and get $7k per year???

Cheers,

The Y-man

I am guessing in a year or two the yield on the 'initial' 200K goes up (and the capital goes up) so then you are in a much better cashflow positive situation than if you had only put in 100K

 

[Simon]

I am guessing in a year or two the yield on the 'initial' 200K goes up (and the capital goes up) so then you are in a much better cashflow positive situation than if you had only put in 100K

Just like a negative geared property slowly turns positive with time.

hence the mid to long term focus with this sort of plan.

 

[keithj]

I have a fair proportion of my portfolio in LPTs. Also in res & comm IP & blue chip shares. They return around 14% over the long term, roughly the same as investment grade shares & IP. They usually have stable income, even though their share price may vary.

One advantage they have over CPTs is they are usually more liquid, so when that IP bargain comes up I can liquidate them & worry about financing the IP later. This makes up for the slightly lower return, and I can keep 0% in cash.

Another advantage is they have low correlation with IP, & shares. You can margin lend up to 75% (Westfield), or 70% for the next largest 20 or so LPTs.

I'm a fan of diversification...... and LPTs.

KJ