Managed Funds or pay off PPOR

If one is saving for the next property purchase would fellow forumites think it better to invest into managed funds while building up, or use it to recycle debt on ppor, then extract it again via a loc when the time comes to buy a property?

Actually, now that I read this post again myself its probably best to go one step further and pay down the ppor recycling the debt and take it back out with a loc, then invest this into managed funds. Even use a margin loan for greater leverage again (quite aggressive). Am I right in thinking that this is what Steve means by using your dollar multiple times in the LOE strategy?

 

There's a diagram on p 14 of part III of the Living on Equity articles series which shows where in Steve's methodology you end up working your dollar 6 times.

What you're suggesting is very much in line with the idea of having an optimised, i.e. efficient asset structure and working your assets hard (so hopeful you don't have to for the next 40+ years)

 

ok great - thanks Nigel so I am reading it correctly then. If you are following this "progamme" as such, where is their room for managed funds other than the income type funds (navra) to offset property holding costs - in other words when following the LOE strategy do people still feel they need to diversify into other growth share funds instead of just property.
I'm not looking for "advice" - just general conversation on the topic and thoughts...

 

That's a good question. I guess it depends on your cashflow needs.

If you have a very strong free cashflow, or are not heavily geared pending further investments, then a mix of growth and income funds/shares would seem sensible.

The key is to strike the right balance to let you get maximum amount of growth property under your control, because it is the growth LEVERAGED to a higher extent than is safely possible than with shares/funds which will really move your net worth to greater heights...

Cheers
N.

 

The main thrust of converting your non-deductible debt to deductible debt is correct (ie pay down PPOR and redraw into investments). How leveraged you want to take it depends on your risk profile and the returns you expect to receive.