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Cashflow

Discussion in 'General Investing Discussion' started by ActiveTrade, 29th Jun, 2008.

  1. ActiveTrade

    ActiveTrade Well-Known Member

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    Hi all, with a very little dividend expected from the Navra Fund :( this qrtr ( not sure what can happen with one more day of trading ) I am going to be running into a cashflow problem repaying bills and loan repayments over the next 3mths.

    I have comitted also to purchase grapes this year to min tax and loan repayments commence Mid July ! To make things worse ... Tax return not expected till at least September :mad:

    Unfortunately our reserve cash buffer has been eaten away slowly with new PPOR purchase and few repairs.

    I am comfortable that long term our IP and MF portfolio and structure is the right one ... short term ... I am beginning to feel fairly unforcomfortable as I have always had surplus cash.

    My questions -

    1) Anyone else run into a short term cashflow shortfall situation ?

    2) What have you done about it or are you doing about it now ?

    3) Any use in discussing alternate arrangements with bank ?

    4) Have you had to sell down shares, IP or MF's and take the loss ?

    5) How do you keep positive in turbulent times such as this one ?

    Thought I'd get others' opinion and views as I am sure there are plenty of folks with more investing experience than me here.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I suggest the first step is to map out clearly what income you'll have and what expense commitments you have over the next couple of quarters.

    Thinking about it all at once makes it seem bigger than it really is when you break it down.

    At the end of the day, if you need to sell a few shares or redeem some managed fund units to help cover short term cashflow requirements - even at a loss - then so be it ... it's not as if you are liquidating everything, right?

    Don't sell everything at once - just sell enough to keep you going until the next bill is due. Make sure you allow enough time for the cash to actually reach your account - some managed funds can take a few days to see the cash into your account ... especially if using a margin loan.

    I wouldn't sell an IP unless things were desperate and there was no other choice ... unfortunately you can't partially sell down your IP (actually you technically can, but I fear it would introduce far more problems than it solves!)

    Other suggestions - would a credit card or personal loan see you through (although the cost I would think is far higher than the benefit - so might not be worth while).

    Most of all - I'd make sure you have a plan for getting your buffers back in place and keeping them there (and avoiding the temptation to dip into them to do stuff to the PPOR) ... focus on the long term plan and don't let the short term issues get to you ... this too shall pass.

    Just a suggestion.
     
  3. Mark Leo

    Mark Leo Well-Known Member

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    Active',
    What about drawing down equity from an IP or two? Are you in a position to be able to do that?
    ML
     
  4. ActiveTrade

    ActiveTrade Well-Known Member

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    Sim - thanks for your response. You have this incredible ability to explain things so clearly. :)

    Good point about breaking things down. I have spent some time analysing the shortfall and when you put it in perspective it certainly helps look at the bigger picture. I certainly am not at the point where I have to liquidate everyting.

    The biggest challenge is the PPOR. So many "nice" improvement things to do ( gardening, blinds, paint, door handles, light fittings, etc... ) that are not really necessary right now. It has taken a cashflow challenge to realise this. I have certainly under-estimated all the emotional aspects that come with owning a PPOR.

    Personal loan / credit card can always assist just scared of the high rates that follow.

    Leo - there may be a little more equity I can tap into and will organise some revals to be done.
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It's a very common problem - you are not alone there!
     
  6. lorrimer

    lorrimer Well-Known Member

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    Mark, sorry but I don't really understand this suggestion.
    I also have a cashflow problem, but do have 200K sitting unused in a LOC.
    I've avoided dipping into the LOC because of this lack of cashflow and the problem of how to repay the interest. Please explain.

    Active'
    One thing that I did was to go through my managed funds with a fine tooth comb, checking on returns v holding costs. I found that one of them, although it had held up very well in this market, was costing more to hold than it was paying out in distributions.
    So out it went.
    Probably a fairly obvious solution, however if you're like me and you had a set & forget type portfolio you could easily overlook this kind of situation.
     
  7. Mark Leo

    Mark Leo Well-Known Member

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    lorrimer,
    Two things come to mind that may help your cashflow situation.
    1. pay your loan interest using your LOC. i don't personally do this but i've read that this is possible. Does anyone here do this?
    2. draw down some equity and place into an income fund to enhance your cashflow. i personally use this approach to enhance my cashflow.
    Mark Leo
     
  8. ActiveTrade

    ActiveTrade Well-Known Member

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    Mark Leo - I actually have an income producing Fund (ie- Navra) not sure I should be putting in any more $$$'s here if it's costing me more in interest vs return.

    Any other income producing funds currently doing well out there now I should look at ?
     
  9. JustB

    JustB Well-Known Member

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    You'd need to investigate if this is possible (though in theory I don't see why it wouldn't be), but if you've purchased grapevines for tax minimisation via an ABN that is GST registered (as recommended by Navra), you should be able to lodge the annual statement to claim the 10% GST back immediately. This may give you enough of a buffer to ride out the next little while until the Navra fund distribution is paid out and your tax return is processed.

    Can anyone else confirm or deny if this is the case?
     
  10. clayton4115

    clayton4115 Member

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    Can anyone else confirm or deny if this is the case?

    You definately can claim the GST back, if you have an ABN and registered for GST purposes.
     
  11. Redwing

    Redwing Well-Known Member

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    :D

    Can only but agree with that...
     
  12. ActiveTrade

    ActiveTrade Well-Known Member

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    Yep - this year we have borrowed full loan amount + GST. Just need to wait for ATO to send out BAS statements. My understanding is that you cannot claim anything ASAP. Hopefully that is soon.
     
  13. Mark Leo

    Mark Leo Well-Known Member

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    lorr',
    You could have a look on Compare Funds :: Managed Fund Comparison Charts and Statistics to see how the various income funds are going i.e. past performance. By my reading there are over 20 income funds listed on the site so that should give you a good indication of performance. My guess is that the Nav fund is probably par for (or slightly ahead of) the course...? It's my understanding that this fund has to pay out all trading profits at the end of the FY so we'll see what happens in the next couple of weeks. I'd be suprised if they can't crack 3 - 3.5% for the quarter (10% for the year).
    ML
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You obviously haven't been following the other thread about the Navra fund. Prediction several weeks ago was for a 1% distribution for the quarter - around 8% for the year ... which is certainly less than what they aim for. It's been a bad quarter.

    If the market starts to recover (and holds onto the gains) this coming quarter, then I think the distributions will pick up nicely.
     
  15. Mark Leo

    Mark Leo Well-Known Member

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    Sim,
    My reading of the other thread is that the distribution is still unknown. Are you suggesting that you have some more information?
    ML
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Prediction by Steve on the 21st was 1% distribution for the quarter. Exact distribution figures wouldn't be available yet.