Living Off Equity II - The Spreadsheet Strikes Back

[MarkB]

Hi

I've been fiddling in excel in an attempt to get my head around the LOE issue. The attached spreadsheet is where my thinking is at.

Comments made by Bill and Steve got me thinking.


To try and be faithful to (my understanding of) what Steve is saying, in the spreadsheet:

1. Interest accrued on the margin loan is capitalised to the loan.

2. Where the CG of the managed fund does not support the capitalisation of the margin loan interest - as a result of the desired LVR - then a top up amount into the margin loan is made from the LOC (to bring the margin loan precisely back to the desired LVR)

3. Rents increase (from their initial yield) at the average of CG and CPI (set at 3% for the 20 years).



A few random points:

- Crudeness aside, I think this spreadsheet can shed some light on the whole LOE issue

- I have not invested a great deal of time building the spreadsheet. It has not been tested to deal with every scenario. So if you fool it into accepting negative LVR's etc, don't hold it against me.

- The numbers I have plugged into the spreadsheet initially (CG, yields, interest rates, etc) are purely illustrative. They do not neccesarily reflect what I believe the future may hold. Change them at will (and yes, the spreadsheet does accept negative CG inputs)

- Pick it to pieces (I really dont mind) and suggest ways it can be improved. But if you do go away and improve the spreadsheet, then please post the improved version on the forum.

- Like any simulation this can only approximate reality.

- What you put into the model, is what you get out of it.



And just two final things:


1. I have never met Steve Navra (or any of his advisers), never been to one of his seminars, nor am I an investor in any of his managed funds.

2. I am not an investment adviser and this is not investment advice.

Enjoy

Mark

 

[Andrew_A]

Skinny margin

Excellent work.

I like the smooth curves in the graph and wish real life was like that sometimes!

LOE is an excellent strategy, just not a one size fits all scenario.

The most important part of this spreadsheet for me are the assumptions. Who knows what will be the CG rates for property and shares into the future? Thats what makes it all fun

 

[thefirstbruce]

THis thread needs a bump considering LOE is flavour of the month, yet again.

 

[MarkB]

Having to admit an error once is bad enough, but twice (this is basically a repeat of a post I just made).




There's an error in that spreadsheet.

I recall finding it and getting about 3/4 through fixing it before something else seemed more important.

I'll get back into it, find the error and fix it.

Bear with me.

Mark

 

[MichaelW]

OK,

Given Mark's spreadsheet makes mine look pale by comparison, I'll link it up here anyway. It is a very simple one-pager which allows you to model the impact for "any given year" assuming a mix of variables for that year. Mark's is much more robust and rolls forward allowing for moving variables through a cycle.

The simplicity of the one-pager might appeal to some, so it probably doesn't hurt to throw it up.

Mark, I'm sure this won't detract in anyway from your thread. Looking forward to the rectified model of yours. I think I spotted an error in it, but I'll wait until you post the fixed one. My property liabilities looked too low in the data sheet, but that could just be my reading of it...

Cheers,
Michael.

 

[thefirstbruce]

Thanks Mark and Michael. Linux wasn't built overnight either , and it is great to see resources dealing with matters as profound as LOE being evolved and made freely available.

 

[Ol School Skata]

Does anyone have a spreadsheet for LOE from the very start of accumulating properties - right through to years of LOE?

I have been putting one together for the last couple of nights which i want to encompass accumulating, holding costs includ neg gearing, upfront costs for each property etc but at the moment, for simplicity it is using standard assumptions eg average 7% growth for 30/40 years, avg inflation 4%/year all established from a data entry page.

If one already exists i would love to have a look . If people don't mind i will post mine as it gets developed for constructive criticism.

OSS

 

[Ol School Skata]

My apologies crew - a little slow on the uptake here for this...have been distracted by cyclone preparation meetings (ie parties) for the past couple of days..

As soon as things are back to normal will continue with this development...but i can't say i am an excel guru with this. There are quite a few variables to account for...

OSS

 

[emw]

A quick questions: is LoE easy to do when IPs live inside trusts? It would be shame to gain some bennies & lose others ...

Thanks,

Ed

 

[D.T.]

Why would it make any difference? It'd probably be easier if anything.