Living off Equity - is this still an option?

[geoffw]

In the most basic terms bianca, at least the way Navra do it is to draw down the equity from your properties, invest it in an income producing asset (like shares or a managed fund - I know I particularly good one, wink wink) and use the returns from that to live on.

As long as you are making enough from the returns, then everything is fine. Like Simon said earlier, LOE is a style that needs to be monitored, you can't just set and forget. Just something to ponder.

Mark

With respect to you, and your understandable enthusiasm which you have held for Steve and his methods for some time, I had not realised that you were working for him until Steve pointed it out. In fact, in an earlier thread, where it was suggested that you worked for him, you had denied it.

Did I miss something? I try to follow all posts in the forum, but I don't remember you mentioning that you were employed by him.

You may not have been working for Steve then, but in the interest of fair exchange in the forum, I think it would have been worth while to mention that you had started working for him at the time it happened.

 

[Mr. Fabulous]

Why Geoff?

I personally don't see that it's anyone's business if I now work for Steve or not. The style of my posts hasn't changed since I started working for Steve and I'm not spamming or pushing an agenda on anyone. It's not like I just started commenting on this issue all of a sudden out of the blue. In fact, I deliberately chose to hold back a number of times. Just as a note, I was not working for Steve at the time when it was brought up.

How about we get everyone that posts on the forum to give details of their employment? Could you please explain to me exactly what my being employed by Navra Financial Services has to do with my being a member of this forum?

Mark

 

[see_change]

Mark

It is relevant because you have a financial interest in a product you could be seen as promoting.

Knowing you've been a valuable contributor to the forum for a long period I'd be suprised if it actually changes what you say , but regardless of that, perceptions are very important so you probably should change your signiture to reflect your new found vocation. .


See Change

 

[Macca]

Hi Mark,

You have been posting a long time and I believe that your posts have always been balanced but I do feel that it is in best interests of the forum that all people with a commercial/financial connection to the topic should declare that interest.

Others, so affected, always show that fact in their signature and I think that is only fair.

I might also point out, that I believe there is every possibility, that the people who do declare their postion would in fact pick up business from the forum.

EG: Steve, Dale, finance brokers and R/E people all generate enquiries from here because they give their time to the forum and other members appreciate that.

 

[geoffw]

Mark

Could you please explain to me exactly what my being employed by Navra Financial Services has to do with my being a member of this forum?

It has a great deal to do with what you say. If you say, as a private individual, that "xxx Financial Services is a great company" (which I would agree with btw) then I am likely to give weight to what you say.

If you say that "xxx Financial Services is a great company" as an employee of that company then what you say may be influenced by your employment.

If you say "xxx Financial Services is a great company" as an employee of that company, without disclosing that you are an employee of that company, might even be considered as misleading (at a minimum).

I know that you believe that "xxx Financial Services is a great company". And I agree.

But you are walking a different path now. Be careful.

 

[Mr. Fabulous]

Hi guys,

Appreciate your points of view and can see where you are coming from.

However, I choose to stand by what I've stated in the initial post. I have no intention - now or in the future - to spam the fund ever. I haven't done so in the past and I see no reason to do so in the future.

Ever since the 'new look' forum was set up I've posted under my full real name - because I've never had anything to hide. I always stand by what I say and I am always honest. Sometimes I make mistakes or slip up and am (usually) willing to admit to those mistakes.

I could have easily posted under a pseudonym and very few people outside of Navra itself would ever have known I am now employed by them. So long as I am not spamming or advertising Navra, I just can't see why this is even an issue?

Mark

 

[geoffw]

Mark

My suggestion is that to edit your sig to show your association.

You've never spammed, and you have obviously joined NFS because you have been so impressed by them.

Why hide that?

I don't know financial legislation- but I would have thought that it was not a good thing to say that xxx was a fantastic company to invest in without revealing that you were employed by xxx.

However, if you had started by saying that "I am so impressed by xxx that I have chosen to take a career with them as para planner" then I don't think you would have crossed any boundaries. You probably would have picked up a lot more business (in the longer term) by doing so.

As other people have said- change your sig.

 

[redwing]

IMHO Mark it's probably an integrity thing..

If you are up front with Your associations and you promote a certain product with full disclosure of your associations, than most people will take it on face value; by not disclosing this interest or association I believe you do yourself no favours..

Then again, as you say it is your own business and from what I’ve read, most people here respect your views anyhow..

REDWING

 

[Les]

G'day Bill.L

You said this in your reply to Steve Navra (way back about 3 pages - this thread is HOT!!):-

Now unless my maths is wrong, if you add the new $500,000 debt to the existing $1,300,000 debt, you get $1,800,000 debt against property of $2,000,000.
That would be 90% LVR. Did they get this loan on No-doc??? Please tell me where.

Well, on the surface, you might "sound" correct - but, Bill, hasn't the $2,000,000 worth of property just jumped to $2,500,000 ???? Thus, a total of $1.8m loan(s) against $2.5m sounds more like 72% LVR to me. A far cry from the 90% you were claiming.

So, if your calculator really HAS made a mistake, this revelation possibly supports a bunch of figures that Steve has been adding - maybe he's got it right after all (??)

Or am I missing something here?

Regards,

 

[Steve Navra]

You can't change direction in a parked car . . .

My wife can

She reversed into it!

 

[Bill.L]

Hi all,

Les, I copied the part of Steve's post out below that I took it from.....

So for someone with $500,000 of equity available then to employ on a LOE structure . . . who had property worth for example 2,000,000 with $1,300,000 debt.

They might have purchased a $500,000 property in Brisbane. (($125,000 deposit and costs at 80%) and invested the balance of $375,000 into the fund with a 50% margin."

So they started with $2,000,000 in property with $1,300,000 debt.

They then borrowed $500,000...

Of which they then used $125,000 as the deposit on the new property, with another loan of 80% or $375,000 on this.

They then used the other $375,000 from the original loan to margin into the fund.

This would leave loans of $1,800,000 against the original $2,000,000 in property (90%), plus loans of $375,000 against the new $500,000 property (80%). Or an overall leverage of 87% against the overall property portfolio.

Maybe Steve meant some different numbers to start with, or has a different interpretetion to how I took it, so further explanation would be good.

bye

 

[markp]

My wife can

She reversed into it!

My wife did better.

I reversed into her!!!

 

[markp]

Bill,

I apologise to the Forum if some of my personal frustration has been seen as an unwarranted attack and I'll personally review whether my ongoing Forum participation is a desirable proposition.

No need to apologise Alan.

You were doing God's work.

 

[simonjulie]

Hi Keith J
So it looks like it must be you, me and the two Reno Kings and Kevin young(investors club)who are the only ones I know who are living off the "fat of the land"(Property that is).
Anyone else?
Kind regards
Simon

 

[Rixter]

Hi Keith J
So it looks like it must be you, me and the two Reno Kings and Kevin young(investors club)who are the only ones I know who are living off the "fat of the land"(Property that is).
Anyone else?
Kind regards
Simon

Pick me , Pick me Thats what im intending to do. Couple more IP's will have me achieving my holy grail

 

[willair]

So it looks like it must be you, me and the two Reno Kings and Kevin young(investors club)who are the only ones I know who are living off the "fat of the land"(Property that is).
Anyone else?

i guess at some time you have to ask yourself where does the money come from.i live off the income from 2 unemcumbered properties,plus a steady
stream of dividends/taxation credits that accompany the dividends received.
Despite the rises and falls in any market,and if you revise your budget at the
start of each month,have sufficient funds available for any problems that
always come into play,and be realistic in your life then how much do you
need to live off, all i ever wanted to do was produce a investment income
equivalent to the income from employment,im still not at that level but,
who can put a price your own personal time and the freedom to do what ever you want in your own time.
willair........

 

[ani]

So it looks like it must be you, me and the two Reno Kings and Kevin young(investors club)who are the only ones I know who are living off the "fat of the land"(Property that is).
Anyone else?

i guess at some time you have to ask yourself where does the money come from.i live off the income from 2 unemcumbered properties,plus a steady
stream of dividends/taxation credits that accompany the dividends received.
Despite the rises and falls in any market,and if you revise your budget at the
start of each month,have sufficient funds available for any problems that
always come into play,and be realistic in your life then how much do you
need to live off, all i ever wanted to do was produce a investment income
equivalent to the income from employment,im still not at that level but,
who can put a price your own personal time and the freedom to do what ever you want in your own time.
willair........

Have to agree willair

I'm happy to not have to work 9-5 and be able to potter with property and have the freedom to do that and other things. Wouldn't say I'm LOE exactly but it works for me.

 

[Bill.L]

Hi all,

Alan, in your last post that is a couple of pages ago now, you talked where you were coming from, and the honest approach.

But at the beginning you posted the following,

"Originally Posted by Bill.L
P.S. (and it would be good if they got the numbers correct anyway)"

That was in a post that was replying to Steve, about the figures he had just presented. Your name was not in that post at all.

So can we be honest??

We were discussing your example, about the Sydney couple. Suddenly in your last post you bring up the concept of Buffer. This was not in your original or the second set of figures. It would only be built up provided the couple had a few good years in the fund.

Then Steve steps in and states that I do not understand the structure.
Sorry I was only replying to what you had suggested, with the possibility of what could happen if the 10% pa return from the income fund was not there.

We can go round and round in circles here, without much point, but I think you would have to agree with the following.. well I hope you do.

This is what I know....

If you borrow money from a LOC at 6.7% and
If you use margin at a cost of 8%
Then your overall cost of whatever sum is 7.35%.
If the return from the fund is greater than 7.35% pa then you make money.
If the return from the fund is less than 7.35% pa then you lose money.
Steves fund has just had 2 good years averaging 19.66% pa.
Since march 2003 the stockmarket has risen 75% (to the recent high as measured by the All Ords)

End of what you may agree with.

This is what I don't know...

The future.

So I try to look at the probabilities.
1/ Is it possible that the next 2-3 years will have a similar performance to the last few years?? Of course it is.
2/ Is it possible that the next 2-3 years will have a retracement of 50% or more of the recent gains?? Of course it is.

Am I prepared to take on a strategy that potentially gives me double the income if 1/ happens , but could leave me much worse off if 2/ happens??

Am I prepared to take on a different strategy that leaves me with a lower income if 1/ happens, but better off if 2/ happens???

If it is a LOE strategy in retirement, I would be looking for the safety of low debt/no debt, even if the chance of 2/ happening were only 1 in 10.

This thread has taken many twists and turns, and is way too long to be easily read and followed, which is why I did not bring the numbers up again in the examples. Perhaps a new thread if anyone is interested.

bye

 

[handyandy]

Bill

I pay 6.8% on my margin loans. As I have already mentioned overall I pay about 4% because of the buffer I utilise. This ensures a SF for me. If the worst happens so be it, I can weather it.

You say

"If it is a LOE strategy in retirement, I would be looking for the safety of low debt/no debt, even if the chance of 2/ happening were only 1 in 10."

and that is fine for you as I feel you are ultra conservative in your investing, other people are not and are willing to take different degrees of risk. All up this is really what your argument is all about you are just not comfortable with the strategy and are happy to sit and just receive rent with a pile of money (equity) under your bed.

Cheers

 

[kissfan]

i guess at some time you have to ask yourself where does the money come from.i live off the income from 2 unemcumbered properties,plus a steady
stream of dividends/taxation credits that accompany the dividends received.

Hi willair.

Just wondering if the rental income and the dividends you receive are of the same ratio, i.e of the total money you get, as a percentage, what would the rent be compared to the dividends? Hope that makes sense .

Also, have you ever done the figures on how LOE would effect your situation. Could you do it if you chose or is it something you never really considered.

Regards
Marty