Managed Funds Am I missing anything here

Discussion in 'Shares & Funds' started by Redwing, 11th Jan, 2007.

Join Australia's most dynamic and respected property investment community
  1. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,491
    Location:
    WA
    Hi All

    Received our 1/4 Distributions last night from NAVRA


    We Purchased $50 k via LOC
    Professional Package Interest Discount
    9 AUGUST 2006

    Return:

    $1507.95 10 JAN
    $1005.30 16 OCT

    Which is not too bad, I expected around $2,500.00 for a six month period so I'm :)

    Now I have to decide where to go from here and hopefully apply some leverage, as well as look at some of the other Funds Discussed here by everyone.

    Currently we have 4 IP's
    Total Val $1.4M
    Total Loan $640k
    LVR 45.7

    Not including the NAVRA Funds/LOC yet above into the Loans (LOC has $100k still sitting there).

    I was thinking to look at using the remainder of the $100k LOC as
    50% into Managed Fund and could even Margin another 50% to get $150k total)

    As well as purchasing another IP ; 50% Deposit at 80% leverage means a $250k IP (purchase costs could be capitalised).

    Assuming 10% return on Funds
    Assume 4% return on IP's
    Assume 1% Costs/Repairs on Total IP Value

    Am i missing anything here?
     
    Redwing, 11th Jan, 2007
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,415
    Location:
    Sydney
    I haven't looked at your numbers in depth, but I'm wondering, why only 4% return on IPs ? That's not yield is it ? What about capital growth ? I would hope you would get closer to 8 - 10% long term total return (including rental income) ? Otherwise, what's the point when you are paying 7-8% interest ?

    And do you buy new IPs ? If so, then 1% costs/repairs may be accurate, but for older IPs, I would allow at least 3% of gross rent for repairs and costs (from personal experience).

    My suggestion for working out where next is first to work out how much debt you can afford to service based on your expected returns (eg for IP loans - you are likely going to be cashflow negative, so how much extra cashflow do you need to hold an IP worth $X ?) Work out how much you can conservatively expect to receive in returns from other investments such as funds and shares to offset those losses and provide extra income.
     
    Simon Hampel, 11th Jan, 2007
    #2
  3. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,491
    Location:
    WA
    Thanks Sim,

    I actually adjusted it to 2.5% after revision this morning.

    I haven't allowed for Capital Growth in the calc's just a cashflow scenario at this stage.

    ....No IP's are not purchased new, three are - and one is +.
     
    Last edited by a moderator: 11th Jan, 2007
    Redwing, 11th Jan, 2007
    #3
  4. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,491
    Location:
    WA
    I work out that before tax refund/depreciation etc it costs me -$270.92 p/wk or -$14,087.88 p/annum to hold the IP's

    Average Yield is 7.37% for the IPs (yields are based on curent loan/rent) and assuming costs (additional to loan interest) of 25% of the weekly rent for miscellaneous costs.

    Not sure from here how to:

    Ideally I'm looking to add to the strategy (if I can call it that, its more stumbling through) by;
    Increasing Yields/Returns
    Increasing Leverage
    Decreasing Risk :)
    Diversify
    Defer or Reduce Tax

    At this Stage its Residential IP's, some cash and NAVRA (Managed Fund) though I've thought about;
    Other Managed Funds,
    Direct Shares (growth) or via Installment Warrants,
    Commercial Property Trusts,
    International Managed Funds
     
    Redwing, 12th Jan, 2007
    #4
  5. Glebe

    Glebe Well-Known Member

    Joined:
    29th Sep, 2019
    Posts:
    819
    Location:
    Central Coast NSW
    I'm not sure what's best cashflow-wise, I haven't really looked at your numbers. However I've noticed that since you only invest in IP's and Navra Aussie fund your portfolio is tied to the success of the Australian economy.

    I'd diversify into International managed funds to reduce your risk.
     
    Glebe, 12th Jan, 2007
    #5