With long term rental yields consistently decreasing and reaching historical lows in most places is anyone out there successfully using Steve Navras Rental Reality when purchasing properties? Using this as a guide to property values it appears most properties around today are overvalued and have been for some time. Whilst this is understandable due to the high growth of the last few years I have trouble seeing how yields will increase enough to allow property selection using Steves Rental Reaility. Maybe I haven't been in the property market long enough to see what happens at different stages of the cycle, however looking at historical yield charts they show yields have been decreasing over the long term. On the other hand I don't believe yields will improve as a result of a property crash and it would need to be a big crash for this to happen anyway.
Steve Navras Rental Reality
- Thread starter MichaelM
- Start date
I think Steve's rental reality can be used as a good guide as to whether you should be buying in any particular market / area / house.
I went to his sydney seminar last weekend and when someone asked him what you do if you can't find any properties that fit with his rental reality , his answer was simple . Don't buy.
Robert Kiyosaki gives similar advice in Retire young , retire rich . Once he decided on his plan , it took several years before he could find a property that fitted with his criteria.
Steve's and RK's Criteria are poles apart , but the underlying advice is the same. If you can't find a property that makes sense from an investment point of view, don't go off an buy something , just for the sake of buying something.
These guys are both successfull investors.
If you are going to buy in the current market, you need to be able to explain why you think it's a good investment and what you expect to achieve from it. If you can't explain that , you need to spend more time reseaching and looking at different ways of investing , before you take the plunge.
See Change
I went to his sydney seminar last weekend and when someone asked him what you do if you can't find any properties that fit with his rental reality , his answer was simple . Don't buy.
Robert Kiyosaki gives similar advice in Retire young , retire rich . Once he decided on his plan , it took several years before he could find a property that fitted with his criteria.
Steve's and RK's Criteria are poles apart , but the underlying advice is the same. If you can't find a property that makes sense from an investment point of view, don't go off an buy something , just for the sake of buying something.
These guys are both successfull investors.
If you are going to buy in the current market, you need to be able to explain why you think it's a good investment and what you expect to achieve from it. If you can't explain that , you need to spend more time reseaching and looking at different ways of investing , before you take the plunge.
See Change
Michael,
a 10% decrease in price will result in slightly more than a 10% increase in yield. A 10% decrease could be achievable by things other than a crash eg sellers who need a quick sale, need the money etc.
what length of time are you using when you talk about the "long term". My gut feeling is that you are probably right. Might be interesting to consider what some of the factors are, and when these impacted on yields. My guesses as to when some factors impacted on yield would be after:
a. banks started to finance IPs at residential interest rates. At one time the interest rates were from memory 1% higher and maybe a higher deposit was needed
b. introduction of building write-off
c. withdrawal of negative gearing
d. 1998 - changes in capital gains tax
There may be others and of course macroeconomic factors in the economy will also impact on yields shortterm
I would think at the moment people are prepared to tolerate low income yields because they are expecting capital growth, so they are investing for a Total Return (income plus capital growth). However, what happens if Capital Growth stagnates? Then people will look at other investments, thus reducing the demand for real estate and removing a growth driver. I think the Financial Review or Business Review Weekly had an article in the past week suggesting businesses were on average getting a 15% return. So if the total return in real estate is less than an alternative, people will invest elsewhere.
Real estate investing like all investing has risks:
vacancies
possible difficulty in selling investment
etc
I think in each RE market you're in you need to assess risk and use this to work out what return you want and if it is possible to invest there and get that return. For example, in a coastal area with a strong regional economy you might want x% return, in an inland regional city it might be x+y%, and in a remote rural town dependent on agriculture you might want x+y+z%.
I think what Steve Navra's Rental Reality is saying is don't get caught up in the emotion and think if you don't invest now you'll miss out. Look at the returns historically and now.
a 10% decrease in price will result in slightly more than a 10% increase in yield. A 10% decrease could be achievable by things other than a crash eg sellers who need a quick sale, need the money etc.
what length of time are you using when you talk about the "long term". My gut feeling is that you are probably right. Might be interesting to consider what some of the factors are, and when these impacted on yields. My guesses as to when some factors impacted on yield would be after:
a. banks started to finance IPs at residential interest rates. At one time the interest rates were from memory 1% higher and maybe a higher deposit was needed
b. introduction of building write-off
c. withdrawal of negative gearing
d. 1998 - changes in capital gains tax
There may be others and of course macroeconomic factors in the economy will also impact on yields shortterm
I would think at the moment people are prepared to tolerate low income yields because they are expecting capital growth, so they are investing for a Total Return (income plus capital growth). However, what happens if Capital Growth stagnates? Then people will look at other investments, thus reducing the demand for real estate and removing a growth driver. I think the Financial Review or Business Review Weekly had an article in the past week suggesting businesses were on average getting a 15% return. So if the total return in real estate is less than an alternative, people will invest elsewhere.
Real estate investing like all investing has risks:
vacancies
possible difficulty in selling investment
etc
I think in each RE market you're in you need to assess risk and use this to work out what return you want and if it is possible to invest there and get that return. For example, in a coastal area with a strong regional economy you might want x% return, in an inland regional city it might be x+y%, and in a remote rural town dependent on agriculture you might want x+y+z%.
I think what Steve Navra's Rental Reality is saying is don't get caught up in the emotion and think if you don't invest now you'll miss out. Look at the returns historically and now.
If you are going to buy in the current market, you need to be able to explain why you think it's a good investment and what you expect to achieve from it. If you can't explain that , you need to spend more time reseaching and looking at different ways of investing , before you take the plunge.
See Change[/QUOTE]
Great answer!
See Change[/QUOTE]
Great answer!
MichaelM said:
Hi MichaelM,
Yields have been decreasing especially over the last years.
This IS CATERTED FOR by the "Rental Rality" formula.
So as the yield decreases each year (Generally as a result of increasing prices) so the 5 YEAR YIELD AVERAGE also decreases . . . keeping "Rental Reality" in line with actual reality!
Steve
Hi, This is my first post so I hope I don't offend anyone with the following observation.
I attended one of Steve's seminars last year, and decided to use his company's services as part of my investment plan. I was shown a number of properties to consider buying as IPs. In general the yields of these were around 4% (up to 5% if you were lucky). I'm pretty sure these did not satisfy the rental reality formula, but I was told that in general they (the Navra advisor) are happy with 4-5%. That didn't inspire much confidence - I know that rental reality is only one part of the picture, but my impression from the seminar and posts here was that it was a pretty important part. If anything, in the current market I thought you would want to stick to it.
Please don't get me wrong - I have great respect for Steve and his work, but maybe some of those working for him don't fully understand his approach (or maybe Navra the company has grown too big for Steve's vision to be maintained??).
I attended one of Steve's seminars last year, and decided to use his company's services as part of my investment plan. I was shown a number of properties to consider buying as IPs. In general the yields of these were around 4% (up to 5% if you were lucky). I'm pretty sure these did not satisfy the rental reality formula, but I was told that in general they (the Navra advisor) are happy with 4-5%. That didn't inspire much confidence - I know that rental reality is only one part of the picture, but my impression from the seminar and posts here was that it was a pretty important part. If anything, in the current market I thought you would want to stick to it.
Please don't get me wrong - I have great respect for Steve and his work, but maybe some of those working for him don't fully understand his approach (or maybe Navra the company has grown too big for Steve's vision to be maintained??).
Michael
Great question.
I have been asking every property guru I know this same question for five years and nobody has the answer. Following Steves yeild model I would have stopped buying years ago as I am not keen on buying in remote destinations chasing yeild - think of all the growth I would have missed.
When I satrted investing in property (93) I was buying positive cash flow property in blue chip suburbs of Perth. Yields have dropped ever since and I keep asking where will it end. You will not find anyone more posiitve on property (in the property vs shares debate) than me but in my view, current yeilds point to serious overpricing to the extent that it now makes more financial sence to rent rather than own a principle residence!!! (you can rent for as low as 2% of the cost of a home?).
I believe prices have been driven too high in this cycle due to a combination of abnormalities in the market such as:
- baby boomers seeking to invest for retirement
- sustained long term low interst rates (we have been spoiled into security)
- imigration
- first home buyers grant
- gst inflation spike
- sustained economic growth
- explosion of get rich quick property seminars
- very easy access to finance - ability to buy without any savings via deposit bonds etc.
- etc
-etc
None of these factors are normal or sustainable.
My thoughts only...loved to be told otherwsie as I really love buying property but it just does not stack up?
richard
Great question.
I have been asking every property guru I know this same question for five years and nobody has the answer. Following Steves yeild model I would have stopped buying years ago as I am not keen on buying in remote destinations chasing yeild - think of all the growth I would have missed.
When I satrted investing in property (93) I was buying positive cash flow property in blue chip suburbs of Perth. Yields have dropped ever since and I keep asking where will it end. You will not find anyone more posiitve on property (in the property vs shares debate) than me but in my view, current yeilds point to serious overpricing to the extent that it now makes more financial sence to rent rather than own a principle residence!!! (you can rent for as low as 2% of the cost of a home?).
I believe prices have been driven too high in this cycle due to a combination of abnormalities in the market such as:
- baby boomers seeking to invest for retirement
- sustained long term low interst rates (we have been spoiled into security)
- imigration
- first home buyers grant
- gst inflation spike
- sustained economic growth
- explosion of get rich quick property seminars
- very easy access to finance - ability to buy without any savings via deposit bonds etc.
- etc
-etc
None of these factors are normal or sustainable.
My thoughts only...loved to be told otherwsie as I really love buying property but it just does not stack up?
richard
CantWait said:
Hi CantWait,
Well, I don't wish to offend anyone either . . .
Properties with a 4% to 5% yield might well be in the Rental reality range as the 5 year percentage yield has been falling at a fair rate during the past few years. (The growth in property prices has been quite unprecedented in some areas, especially in Brisbane.) The current yields in some of these areas is in the 3.5% to 4% range.
The company has not "grown too big for my vision" . . . I am as accessible as I ever was, still give every client my personal mobile number and have not (to the best of my knowledge) failed to respond to an e-mail or private message question or request for help.
Please feel free to contact me you should you need any assistance.
Sincerely,
Steve
- Some of these factors may be normalities rather than abnormalities?rich ando said:
-Immigration may have slowed, but it could be a factor- especially in some local areas such as SEQ where the net migration is still strong
-Baby boomers are going to be around for a while, and may be a strong influence for 10-15 years to come
-Some of the big Get Rich Quick people have gone. But there are still people out there doing solid get rich slow seminars (Jan Somers type ideas) and that could still be an influence
-Who knows what is going to happen to economic growth and interest rates?
What is the best way of obtaining the 5 YEAR YIELD AVERAGE? I contacted the REINSW who told me about a report they have called Property Focus for $65:
"A summary of the major property and economic indicators for Sydney, NSW and selected Australian comparisons for example, finance approvals, building
commencement, auction clearance rates, property sales details (volume,
value), residential rental statistics ($/week, vacancy rates), mortgage
interest rates, CPI and unemployment details. Also provides details of
median price movements and sales volume for houses, units and residential
land for both Sydney and NSW by geographical area. Printed quarterly."
I'm assuming this report would not list the annual rental yields for each postcode over the last 5 years.
"A summary of the major property and economic indicators for Sydney, NSW and selected Australian comparisons for example, finance approvals, building
commencement, auction clearance rates, property sales details (volume,
value), residential rental statistics ($/week, vacancy rates), mortgage
interest rates, CPI and unemployment details. Also provides details of
median price movements and sales volume for houses, units and residential
land for both Sydney and NSW by geographical area. Printed quarterly."
I'm assuming this report would not list the annual rental yields for each postcode over the last 5 years.
MichaelM said:
Hi Michael,
Residex supply the past yields per post code at a cost. (At approx $60-00 per post code.)
Take the past five years yields and average them.
Regards,
Steve
crimpy said:Hi Steve, Can you please elaborate on 'client'.
Is a client someone who has attended your 2 day seminar and purchased shares in the company, or is it someone who has paid the $3000 upfront
Hey Crimpy,
I am accessible to anyone who has attended a course. (I give all attendees my private mobile #)
Likewise I am always available to any forum member . . . via private message.
Regards,
Steve
Navra Strategy
Hi, Crimpy,
Let me give you a little of my history.
At the age of 57, I thought my days of IP'ing were gone.
I e-mailed Steve....personally.
He replied promptly, giving me some good advice.
Went to his seminar......cost $270 from memory ...2 day course....
Mind-blowing..........
Free consultation with local branch.......yes, free....and not one, but several consultations..
Have just settled on a property in Brisbane.
ALL thanks to Steve Navra and his group.
Crimpy,my friend, where did you get the $3000 from? Are you implying that Steve Navra 'sucks' you in and then hits you with the big bucks bill of $3000?
I hope that's not what you are inferring.......because it's just not on.
And to infer that ...if that's what you are doing........is doing a gross injustice to Steve Navra and his group.
Mate, have a look at Steve's website....try BOTH of them.....Navra Financial Services and NavraInvest....ask questions on this forum....e-mail or PM Steve or any of his staff....they are all so approachable........won't cost you a fortune...and, me old mate, keep the 'fictitious' $3000 in your OWN bank...
Steve doesn't need it..........................
Cheers
Will
Hi, Crimpy,
Let me give you a little of my history.
At the age of 57, I thought my days of IP'ing were gone.
I e-mailed Steve....personally.
He replied promptly, giving me some good advice.
Went to his seminar......cost $270 from memory ...2 day course....
Mind-blowing..........
Free consultation with local branch.......yes, free....and not one, but several consultations..
Have just settled on a property in Brisbane.
ALL thanks to Steve Navra and his group.
Crimpy,my friend, where did you get the $3000 from? Are you implying that Steve Navra 'sucks' you in and then hits you with the big bucks bill of $3000?
I hope that's not what you are inferring.......because it's just not on.
And to infer that ...if that's what you are doing........is doing a gross injustice to Steve Navra and his group.
Mate, have a look at Steve's website....try BOTH of them.....Navra Financial Services and NavraInvest....ask questions on this forum....e-mail or PM Steve or any of his staff....they are all so approachable........won't cost you a fortune...and, me old mate, keep the 'fictitious' $3000 in your OWN bank...
Steve doesn't need it..........................
Cheers
Will
Astroboy,
Very well
Details,
From the web site as of 6:57 (Sydney time) 14/3/2004
Retail ($) Wholesale ($)
Application Price 1.0313 1.0310
Redemption Price 1.0283 1.0280
I can not cut and past the performance chart but here is the link;
http://www.navrainvest.com.au/index.asp?content=fund_perf_retail
It shows 10.25% since inception as at 11/3/2004
Distribution since inception (another one is coming up at end of March)
Quarter End Retail Wholesale
(cents/unit) % (cents/unit) %
JUN 2003 1.0640 1.06% 1.0630 1.06%
SEP 2003 3.2000 3.08% 3.2000 3.07%
DEC 2003 2.9981 2.95% 3.0568 3.01%
I bought around $.99 and since then reinvested, a mate of mine bought first around $1.02 then after receiving dividend in December bought more (extra funds) at $.995. He is happy and so am I.
By the time the 1 year anniversary is coming up, I am expecting the return will be somewhere in the 11% to 13% range.
The market almost just went up during this period, which is not the best for Steve. He needs more volatility then the fund should fly.
Very well
Details,
From the web site as of 6:57 (Sydney time) 14/3/2004
Retail ($) Wholesale ($)
Application Price 1.0313 1.0310
Redemption Price 1.0283 1.0280
I can not cut and past the performance chart but here is the link;
http://www.navrainvest.com.au/index.asp?content=fund_perf_retail
It shows 10.25% since inception as at 11/3/2004
Distribution since inception (another one is coming up at end of March)
Quarter End Retail Wholesale
(cents/unit) % (cents/unit) %
JUN 2003 1.0640 1.06% 1.0630 1.06%
SEP 2003 3.2000 3.08% 3.2000 3.07%
DEC 2003 2.9981 2.95% 3.0568 3.01%
I bought around $.99 and since then reinvested, a mate of mine bought first around $1.02 then after receiving dividend in December bought more (extra funds) at $.995. He is happy and so am I.
By the time the 1 year anniversary is coming up, I am expecting the return will be somewhere in the 11% to 13% range.
The market almost just went up during this period, which is not the best for Steve. He needs more volatility then the fund should fly.
I hope this isn't a personal attack!! ??
As the title says.... I hope this isn't a personal attack!! ??
I think you will also find that NavraInvest has taken no performance fee. They appear to have performed well but not as well as the 'index'.
Please compare the results to your own and let me know how you're doing. I'm looking for someone to show me how to outperform the index on a regular basis.
Please keep things civil.
Regards,
1putt
PS I have no affiliation nor investments with Steve Navra or his companies. I do however appreciate his regular, open and honest posting to this forum.
astroboy said:
As the title says.... I hope this isn't a personal attack!! ??
I think you will also find that NavraInvest has taken no performance fee. They appear to have performed well but not as well as the 'index'.
Please compare the results to your own and let me know how you're doing. I'm looking for someone to show me how to outperform the index on a regular basis.
Please keep things civil.
Regards,
1putt
PS I have no affiliation nor investments with Steve Navra or his companies. I do however appreciate his regular, open and honest posting to this forum.
Tibor said:Astroboy,
Very well
By the time the 1 year anniversary is coming up, I am expecting the return will be somewhere in the 11% to 13% range.
Tibor:
Is 11% to 13% a net growth?
Quickly check through some funds which has one year performance up to 67%. See this Link:
http://www.tradingroom.com.au/manag...spect=true&cmd=rp&sy=tpl&assb=as&sort=1y_perf
TGP
astroboy said:
Steve,
I was wondering if you could clarify something about the NavraInvest Fund for me please? There are so many different types of Funds around and to be honest I often get a bit confused about how they differ.
In the Financial Review they regularly print a section on 'Managed Funds Performance - Rankings & Ratings'. I think Morningstar do it. There are dozens and dozens of different sections such as Multisector Defensive, Multisector Moderate, Multisector Balanced, Multisector Growth, Multisector Aggressive, Multisector Misc, Aust Equity General etc etc.
It was my understanding that a Fund has to be operating for 3 years before it appears in the table so obviously NavraInvest wouldn't appear as yet as it's only just coming up for its first birthday.
However, after 3 years, in what section should your Fund appear?
Thanks.
ToGetProperty said:
TGP,
Yes the past year was very good basically for all funds as the market has increased quite a bit. It is just like when the property market grows 20% to 30% in a year basically there is no bad buyer.
Let's see what will the same funds do maybe in the next year or the year after when the market will not be going up, but either declines or wildly oscillates and goinmg nowhere. This is the time when Steve's strategy will come in and yes I am happy to sit on only 11% to 13% until that time.
Before I gave a go to Steve, the very same Colonial and BT who appear pretty high on this list, managed to loose around 35% of their investors fund value, including mine, but their fee was still the same!!!!
while
Steve was making money!!!!!
Unfortunately he did not have the funds available to the general public at that time. So, I rather wait for a couple of years before make a negative judgement about Steve (as you imply that he is badly underperforming).
I have seen funds 1 year making 50%, 60% and loose 20% or more in the next. I was around in 1987, not only in 2000 and seen the carnage what high flying fund managers had.
2c
