WillG said:
mmmm
Somersoft Idol ...
Does that mean we get to vote out who has to leave the forum....???
Could be dangerous.....
See Change *looks over his shoulder *
Living off Equity - is this still an option?
- Thread starter Panic
- Start date
mmmm
Somersoft Idol ...
Does that mean we get to vote out who has to leave the forum....???
Could be dangerous.....
See Change *looks over his shoulder *
Bill.L said:
Bill.L
PLEASE attend a workshop . . . I am doing one in Brisbane this month. It is one day in your life . . . you can attend for free and I will pay for your accomodation if you wish to stay overnight.
I explain everything you have asked . . . it takes about 8 hours.
Some quick points to consider:
Your understanding of the example is incorrect . . .
The couple referred to would never draw down the full 80% of their equity and employ it all in the structure. They would instead retain approx $900,000 in their LOC as a buffer.
The interest on the margin loan would be capitalized. (NOT paid) The CG of the fund would offset the margin loan interest to retain the 50% ratio. If the CG was not sufficient in any year then a) they would have less income or b) they would employ their buffer to get them through the difficult year/s.
Even if the next three years is not like the past three, this couple has sufficient buffer to easily get them through the entire next property cycle.
Each individual couple will assess their own SANF and structure their lifestyle accordingly.
Irrespective of whatever level they might choose, from conservative to aggressive, to not act will be a waste of value they could have accrued.
You continually say: “but what if the next three years is not good”
Well I have waited 3 years now to show you that what you said three years ago did not happen . . .
Well by NOT acting 3 years ago you would have cost this couple over $500k in extra value they could have accrued.
What will happen in the next three years . . . heaven only knows:
What I do know is that the correct structure with the correct safeguards (Buffers) will suffice.
As far as the share fund goes:
Market declines are good for the share fund . . . my best years have been: 1987; 1997; 2001.
A small indication of this occurred in March 2005 where the market decreased 9% . . . and we made a big profit which resulted in a record distribution. (. . . since superceded by this last quarters record.)
Please attend the workshop, then you might understand DCT.
Best of luck to you,
Steve
And the winner is...
Hopefully the forum members, as all the questioning makes Steve contribute a great deal more, and expands everyones knowledge.
"Your understanding of the example is incorrect"
Actually, as portrayed by Alan, my understanding of what this couple were doing was correct. He had them drawing down the full 80% to put into the fund, no buffer there.
Leaving a buffer in the LOC would reduce the amount the couple would have as income, because of lower initial investment and margin, into the fund.
errr.... Hang on which couple are you referring to???
The mythical ones Alan raised in Sydney or your newer example??
bye
Hopefully the forum members, as all the questioning makes Steve contribute a great deal more, and expands everyones knowledge.
"Your understanding of the example is incorrect"
Actually, as portrayed by Alan, my understanding of what this couple were doing was correct. He had them drawing down the full 80% to put into the fund, no buffer there.
Leaving a buffer in the LOC would reduce the amount the couple would have as income, because of lower initial investment and margin, into the fund.
errr.... Hang on which couple are you referring to???
The mythical ones Alan raised in Sydney or your newer example??
bye
"They get a Margin Loan at 50% giving them $4.54mil in Managed Income Fund."
Another day like y'day and today and Mum n Dad have a margin call. Bummer! That's not in the plan. If we are indeed in a secular bear market they could loose everything by Xmas. A 25% fall in the market would wipe out over $1m and remember XAO is down 5% already.
I would absolutely never recommend 50% margin to "folks". I believe myself to be "competent" but would not dream of trading on such a margin in the current climate. So I guess that means I agree with Bill.
Another day like y'day and today and Mum n Dad have a margin call. Bummer! That's not in the plan. If we are indeed in a secular bear market they could loose everything by Xmas. A 25% fall in the market would wipe out over $1m and remember XAO is down 5% already.
I would absolutely never recommend 50% margin to "folks". I believe myself to be "competent" but would not dream of trading on such a margin in the current climate. So I guess that means I agree with Bill.
Hi All
The above examples of taking equity from property to use in other asset classis is an interesting and obviously lively discussion . However,
this is a property investment forum isn't it?
My question is.
Is it possible to live off equity only from property investing?
I know it is possible because I'm doing it although I am still activly growing my portfolio so technically I am living off my portfolio's income not equity.
Is anyone else out there doing it now living purely from the equity gained from property investment Exclusively?
I would be very interested to hear strategies and techniques from other such folks.
Kind regards
Simon
The above examples of taking equity from property to use in other asset classis is an interesting and obviously lively discussion . However,
this is a property investment forum isn't it?
My question is.
Is it possible to live off equity only from property investing?
I know it is possible because I'm doing it although I am still activly growing my portfolio so technically I am living off my portfolio's income not equity.
Is anyone else out there doing it now living purely from the equity gained from property investment Exclusively?
I would be very interested to hear strategies and techniques from other such folks.
Kind regards
Simon
Steve,
This is a brilliant reply.I know l speak for others as well when l request that you continue to contribute,albeit on a reduced schedule,to this forum.
I appreciate your generous offer to Bill and your kindness in your response to his thread.
I have owned property valued at over $3 million in 1990 and drop to $1.2 in 1992.Unfortunately the bank forced me sell because of an internal battle within the bank.I felt the pain,and still do when l read the newspaper cutting
that talks about this property being sold for $5 million in 1997.
Had l had access to $250,000 cash at the time ,l would still own this property
and be earning $300,000 net income per annum.The issue was the cash buffer
was not in place and this was the biggest market crash in Australia's history.
Having lived through the time and the pain it causes,l do question some of the
forward projections ,however,the history in the example presented by yourself is ACTUALLY FACT,so nobody should even think to question it.
I trust that you have a well earned reputation to protect and the buffers you
advocate and put in place ,are very solid.I also accept that if you are not in the game ,you are missing out on the opportunities available.
Whilst,currently l am not able to participate, in a financial sense,in much of what is being discussed ,l would prefer to be in there solving problems rather
than watching from the sidelines awaiting for the big crash so that I can get
set.
I wish everyone success whether you follow Steve or you follow your own
experience and other voices of wisdom.
Denis
This is a brilliant reply.I know l speak for others as well when l request that you continue to contribute,albeit on a reduced schedule,to this forum.
I appreciate your generous offer to Bill and your kindness in your response to his thread.
I have owned property valued at over $3 million in 1990 and drop to $1.2 in 1992.Unfortunately the bank forced me sell because of an internal battle within the bank.I felt the pain,and still do when l read the newspaper cutting
that talks about this property being sold for $5 million in 1997.
Had l had access to $250,000 cash at the time ,l would still own this property
and be earning $300,000 net income per annum.The issue was the cash buffer
was not in place and this was the biggest market crash in Australia's history.
Having lived through the time and the pain it causes,l do question some of the
forward projections ,however,the history in the example presented by yourself is ACTUALLY FACT,so nobody should even think to question it.
I trust that you have a well earned reputation to protect and the buffers you
advocate and put in place ,are very solid.I also accept that if you are not in the game ,you are missing out on the opportunities available.
Whilst,currently l am not able to participate, in a financial sense,in much of what is being discussed ,l would prefer to be in there solving problems rather
than watching from the sidelines awaiting for the big crash so that I can get
set.
I wish everyone success whether you follow Steve or you follow your own
experience and other voices of wisdom.
Denis
RichardC,
According to the Leveraged Equities PDS, a margin call on an account leveraged to 50% that has a maximum lend of 70% (as the Navra fund does) would require a drop in value of 33.33%. If you don't believe me, it's in the table on Page 8 of the PDS - have a look for yourself.
Last I checked, the fund hadn't dropped anywhere near that much in the last two days? Maybe we're looking at two different funds?
Mark
According to the Leveraged Equities PDS, a margin call on an account leveraged to 50% that has a maximum lend of 70% (as the Navra fund does) would require a drop in value of 33.33%. If you don't believe me, it's in the table on Page 8 of the PDS - have a look for yourself.
Last I checked, the fund hadn't dropped anywhere near that much in the last two days? Maybe we're looking at two different funds?
Mark
Denis,Denis said:
Wow, what a great post early off as a new member! You've got such a positive attitude for someone who's come through that bust and lived to tell the tale. I've no doubt you'll be back in the "game" soon, and when you are you'll be a force to be reckoned with.
Welcome to the forum, and please stick around. I think Somersoft will be a better place for your participation.
Cheers,
Michael.
Capitalising interest on a margin loan that's already leveraged to 50% that has a strategy of buying in a falling market, and whos' aim is to provide income rather than growth sounds more than a little risky to me. Can you quantify how risky it is, will the structure fail once in every 10 years or 20 years or is it 100% failsafe (like govt bondsSteve Navra said:
) ?And again getting back to the subject of this thread - what you're suggesting appears to be Living off INCOME (from a share fund & paying tax), not Living off EQUITY (drawing down ever increasing amounts of equity to live off & not paying tax).
Hi Simon,simonjulie said:
I too am living off income from c/f +ve IP with LOE as a supplement. I also have shares & LPTs which provide sufficient income to live off. If & when growth in either shares or IP occurs I may draw down some of the equity & utilise LOE. I may capitalise margin interest & pocket the dividends.
I have cash buffers sufficient to withstand vacancies. LPT income is v. stable (big companies sign 10yr leases), Dividend income is less stable, but still v. unlikely to disappear completely. And all the income sources will grow at inflation or better over the medium term.
The difference from some other strategies is that it is low risk as it relies on rental income, share dividends, LPT distributions and equity growth ONLY if it occurs. I'm happy to pay tax in small quantities.
I too would be interested to know of anyone using Pure LOE - not paying tax & not working - just drawing down equity to live off.
KJ
Steve,
Thanks for contributing again to the forum.
A few weeks back you mentioned that you were running a course focused on living out of capital growth.
Any ideas when the next one is likely to be run in Sydney?
Cheers,
Thanks for contributing again to the forum.
A few weeks back you mentioned that you were running a course focused on living out of capital growth.
Any ideas when the next one is likely to be run in Sydney?
Cheers,
keithj said:
Phone this bloke . . . 0419220907
He is living everything you quote above.
House_Keeper said:
Sydney course mid Novemeber . . . will post details soon.
I will focus on the LOE topic.
(Limited to 30 people)
I'm not really actively contributing to Somersoft again . . .
Just putting some things into a positive perspective.
Regards,
Steve
Cheeks said:Steve is "this bloke" happy to recieve all the calls he is about to get
Just thought I'd check before I called him
Hi Cheeks,
Yes, a very obliging chap . . . quite happy to take the calls
Regards,
Steve
Bill.L said:
Bill,
This thread is starting to take some 'unfortunate' turns isn't it?
If my approach to this thread has been somewhat 'stronger' than normal, it's because I'm human and unfortunately you can frustrate the hell out of me at times.
I'm not a professional debater, financial planner or lawyer and I hoped my intention of trying to quickly compile some acknowledged unchecked figures wouldn't continually get thrown back in my face with comments like the above.
Yes.....in my initial worked example which I tried to set out clearly so it could be examined I transposed a figure incorrectly. As soon as you bought this to my attention I apologised to the Forum for any confusion and redid with updated figures. I did this immediately and at about 1.00am from memory so not to mislead the Forum. Personally, for the sake of the initial basic argument I don't think it actually wound up making a huge difference. Yes....you made a point of saying $900K-odd here and there but at the end of the day in the basic initial example I gave the couple still got their $100K pa and it reduced the extra buffer(from memory?) from about $75K pa to $51K pa.
I've never said there are no risks. I tried to include what I believed to be adequate buffers to cover most of the possibilities and also suggested this methodology may well include when they actually start such a process.
I look back on my posts over a number of years and personally I'd have to say my frustration with you at times is very out of character for me. Maybe others would disagree.......
Essentially and maybe naively I basically believe in a 'fair go'. There have been a number of very fine posters on this site that effectively have been 'hounded off' from here out of frustration and this has been a huge loss. Perhaps you would agree with this?
From some of these people such as Steve(and Dale is another that quickly comes to mind) I have learnt a great deal from over the years and certainly not in all cases, but sometimes, I believe they've earned the right of a 'bit of extra support' from some other members. This is obviously a personal decision and unfortunately puts one in an unfortunate position at times. On occasions I have done this through a post, PM or email.
My 'frustration' with some of your posts is not necessarily related to just this post but obviously comprises a bit of history. At about the time Steve left you made a couple of posts which I read and was clearly shocked by. Not by their brilliant analysis but by their 'style'. The couple of posts I am thinking of were pretty quickly removed by moderators and may well have been the ones that SC was referring to as well.
Let me be quite clear Bill.......I actually enjoy many of your posts and I find much of your analysis very interesting but I must admit I don't like some of your delivery style at times to certain individuals in the slightest. If Steve Navra made a post you could almost guarantee you'd attack it. Sure there was often some good analysis but often it was masked and appeared more akin to a woodpecker trying to peck away at a high profile poster.
Some of your responses could equally have been delivered more along the lines of 'Good point regarding XXXXXX Steve. I hadn't thought about that and it may be a useful tool in my investment toolbox. However, I'll have to look at YYYYY in case it has an adverse affect on my personal situation if ZZZZZZ happens'.
You choose not to frame your posts in that way and that is obviously your decision and your style. Some of these IMHO really cross the 'fair go' line though.
When I saw a couple of general posts (this included) I felt that some of these posts were commenting on a 'Navra Style' process with the knowledge that he probably wouldn't be here to defend it.
When I made my post it was to give an example of a process that based on the best of my understanding was fairly basic Navra 101 LOE and maybe deserved some 'defence' in his absence. Also I quite like it.
Obviously I make no claim that this was some clever process that I devised but I was loathe to say directly that this was a Steve Navra approach for a couple of reasons. Firstly, this is MY understanding of part of the process only. I may have got it 75% right and 25% wrong. Secondly, by attaching the name Navra to my example may well have caused some attack on the individual's process and while no longer being an active member he may not have wanted to get involved in the defense at present.
Personally I think you could both add considerable value to a Forum such as this however this doesn't appear a likely outcome with the clash of styles.
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.
Great honest post Alan
Maybe if every one involved in these debates refrain from using emotive language (Bill's not the only one who gets over enthusiastic at times ) the forum will benifit from the continuing involvement of People like Steve & Dale ( who I noticed recently posted again... ).
I think that in this particular topic , there will continue to be differences of opinion regardless of how long the posts go, and members need to learn when to let go and say nothing.....and let the post die a natural death.
See Change
Maybe if every one involved in these debates refrain from using emotive language (Bill's not the only one who gets over enthusiastic at times )
the forum will benifit from the continuing involvement of People like Steve & Dale ( who I noticed recently posted again... ).I think that in this particular topic , there will continue to be differences of opinion regardless of how long the posts go, and members need to learn when to let go and say nothing.....and let the post die a natural death.
See Change