Managed Funds Navra NO LONGER an Income Fund ?

Well obviously that is your decision.
I would say that there should really be nothing to hide about anyones current investing activities if they are participating in a forum to assist in their own understanding and also assist others. I doubt saying "I invest in the colonial geared shared fund" or whatever would actually compromise your own privacy. Im not saying that anyone expects you to post your financial statement but some examples of some things that you actually invest in would again help clarify where you are coming from.
As far as understanding your point of view, if the student cannot understand what the teacher is telling him, it is not the student that is at fault but the teacher.
I did ask you to present a real life type of scenario explaining the point you are actually trying to make, and again I would still appreciate it if you would do that.
I dont know why you are suggesting that this is an "us against you" type of situation, I have no vested interest in the strategies of anyone here but my own. This should not be seen as some sort of confrontation. If I did not think you actually had something to offer the discussion I would not keep asking, there are plenty of forums around whose residents are lemmings unable to make a valid point, I genuinely want to understand what you are trying to get at. I am in no way an expert having just a couple of years of investing experience, and much less in managed fund investments, so still have plenty to learn and understand.

 

coop:

Firstly, remember I said this is only where my thoughts are heading, so I may be flawed in this thinking. I'm sure you guys will let me know, but I'll put it on the line anyway.

It's not so black and white; there aren't just growth and income assets (although NI's targets are income only).

With an amount of $1m, you could invest $X in growth-only assets and ($1m - $X) in income-only assets in order to create a neutral-ish cash flow. But you could also just invest $1m into assets which are income and growth. Then again, you could invest in any combination in between. So which is best? Well, that's what I'm considering.

Actually, let's do some numbers.

Assumptions
Mortgage rate 7%
Margin Loan rate 8%
Leverage 100%
Total return of 12% for all investments
No other costs, income, etc

Investment 1
IP $445k - 10% growth, 2% income
NI $555k - 0% growth, 12% income

Cash flow
Mortgage = -31.15k
Margin L = -44.4k
IP income = +8.9k
NI income = +66.6k
Net cash flow = 0k
Net Growth Yr 10 = 709215


Investment 2
IP $1m - 5% growth, 7% income

Cash flow
Mortgage = -70k
IP income = +70k
Net cash flow = 0k
Net Growth Yr 10 = 628894

Just for good measure and the sake of completeness, at about Year 20, Investment 1 catches up with the growth of Investment 2.

So what does this all mean? Ummmm... I don't know because I just did the calcs and haven't thought about it. Maybe the additional growth earlier on with Investment 2 will allow more equity to be drawn and more investment in a net sense.

But this is where my thinking is going and maybe where GSJ was going; he's been pushing the income-only investment without growth thing. At the moment, my investments follow the Investment 2 scenario, not because I chose this, just because that's the way it worked out. My industrial property returns about 12-15% at the moment, so it has been working well. Note that I didn't buy them at 12-15% yield; more like 9%.

If you don't think I've been fair with the calcs or returns or anything else, please let me know. I think I was fair with saying NI would do 12% in the long run, that the margin loan for such a large amount would be discounted to 8%, that you can find an industrial property with 7% yield, etc. I've already thought of a million things people will say weren't fair, but we'll see what you guys think.

 

Actually, this may sound biased. In case anyone didn't realise, I meant that at year 20, Investment 1 will catch up AND overtake Investment 2.

 

Iiinvestor:
Thanks a lot for posting the scenario, it is good to have something concrete to work on!
A couple of things:
First of all for net growth on the property, you have included the original cost of $1M. What you probably meant was total portfolio value, which is $1,637,497 (basically the $1m ip at 7% pa compounded).

In the investment including the NI, you have left out the value of the NI investment at the end. Your IP is worth $1,037,497 but remember you also have the original NI investment worth $600,000 taking the total portfolio to $1,637,497 - exactly the same as the first scenario (which of course lines up with my point that only the net return actually matters, if the total return of 2 investments in the same it makes no diff whether comprised of growth or income).

Now I think you have also missed the extra $4,000 per year cashflow from the NI investment. If we invest that $4,000 PER YEAR back into NI at 12%, the value of that is $71,526 at the end of year 10. The total portfolio value of that investment plan then becomes $1,709,023, the difference being the compounded amount your $4k extra cashflow reinvested grows to over the 10 years, so the NI investment is $71,526 better off at the end, which will obviously become even more of a massive difference after say 15 or 20 years.

 

Ahhh yes, good observations, I'll update the post. But the $4k was meant to be negligable, I was trying to make it a net 0 cash flow. Let me work with it...

 

Thanks iii. I guess I have the luxury of approaching investment with a brain that is devoid of too much detail I don't expect anyone on here to take on the burden of mapping out my investment future - I realise that is solely my responsibility and I need to set aside the time to get educated - participating on InvestEd is about the best I can give this education time at present, and I am at "minnow" level, one day hoping to be a shark

I guess all I am trying to enunciate is I'd hate to see this or any thread on InvestEd go the way of other forums where there is plenty of Navra bashing but without the clarity of 'what you should do instead'. I lost all faith in human nature watching the way some past discussions elsewhere transpired, because it was increasingly obvious there were some people who just want to be 'protagonists'.

I believe I have a good nature at heart, all faults aside, and I would do anything to help others if it is within my skillset. I think most people on this forum are the same. I would hate to see that community spirit hijacked and go the way of some other forums.

And GSJ I'm not having a go at you by the way - it just happens to be the discussions on this thread remind me of some of the other issues.

Cheers
Carl

 

I guess just to take it a step further, that $4,000 could be used to fund a $4,000 shortfall on a negatively geared property, whereas without that extra cashflow it may not be possible to get that extra property in the 2nd scenario (which is where the whole income fund investment strategy springs from)

 

GSJ

I hope you don't find my comments offensive because I am not trying to be .. I like good discussions about NI and any valid alternatives that can achieve similar aims to NI, because basically I'm an investment Rain Man (actually that would be an insult to Rain Man )

My pro-Navra attitude comes purely from gratitude that the man himself helped my wife and I start a journey of wealth creation that has absolutely changed our lives. From a base of buggar all, we have created an asset base and plan for the future that will mean our daughter starts life without a care in the world. We currently live like Kings (in my little world) and we were living like Court Jesters previously. I'm passionate about the opportunities the education he provided gave us - seeing and understanding his presentation/s has had nothing short of spectacular results ... for us, in our situation (individual results may vary yadda yadda...)

I couldn't care less about loyalty to NI versus other investments - business is business and if something better comes along I'll take it. The simple fact of the matter is NI is easy to get into, easy to understand, and easy to get out of, and so far it beats the bejesus out of leaving equity tied up doing nothing. Its consistently returned greater than the 10% which is the clearly stated 'expectation', even in the worst performing times.

We have never geared into the fund yet. We also don't have a huge amount of money in the fund at the moment as we have rechannelled the dough into property. But when some more equity is freed up soon, I would still feel comfortable putting it back into NI based on historical performance and what I * think * the fund is capable of.

If you decide to waste your life by reading previous somersoft threads, you'll read some of the prophecies of doom preached by people who were never once prepared to offer up an alternative strategies ... they were just there to stir the s***. Which they did particularly well till they drove Steve Navra off that forum for the loss of the entire community. Some people recognised the loss, given the number of great posts he submitted that WEREN'T selling anything. But a lot just tarred him with a certain brush and that was that.

Steve is a Salesman Extraordinaire. I have no problem with that. If someone uses sales skills to sell me something that does good things for my family, more power to them.

Having said all that, a true salesman needs to meet the critics and be ready to debate logically. I personally was very disappointed the way Steve popped on InvestEd to promote something recently, copped some flak, couldn't handle it, and left us all again. It is not the same situation as the one you've mentioned on SomerSoft as far as I can tell ... I think retreating from InvestEd was an overreaction in the extreme, as the questioning (that I saw anyway) was much more reasonable.

I am immensely thankful to Steve for what he helped us achieve so far, but I think his use of the electronic medium recently leaves a lot to be desired. For that reason I think its sensible NI is lumped in with the masses of other investment options and not singled out for special attention (either positive or negative). Our Super Fund has shares in navra invest, so it would be in our interests to generate as much discussion as possible about NI (no publicity is bad publicity etc) However I don't think that's fair - if no one from NI is going to give back to this community, then personally I think it would be best avoided and concentrate on discussions that can reach some resolution.

Cheers
Carl

 

With the new numbers, they're about even at year 5.

If I take NI down to 10% then it's back to 20 years. It's surprising the difference that 2% would make.

If I leave NI at 12% and take the growth of the IP in Inv 2 to 3%, then they're = at year 2.

IF I leave all as originally but take the growth of IP in Inv 2 up to 7%, then it's up to 44 years!!!!


So this primitive form of sensitivity analysis shows how sensitive the figures are.

 

No matter which way you cut it, if you are comparing assets with the same % return (growth + income) you will always come up with the same result. If you start changing the numbers so that one particular investment returns more than another, you are then no longer discussing underlying strategies and principles, you are discussing which investment will return more. On this front there is little point in the discussion because no one knows what the future return of any investment will be - as we have seen on here some people have no expectation of growth in NI, some people are expecting moderate growth.

 

That scenario was really helpful iii. Only one thing I'd like to know, where can you currently by investment property returning 7% that still has consistent growth prospects (or maybe, don't tell me, 'cos I want one ! )

I don't want to hijack this thread, but I think the way an individual uses NI or similar vehicle must vary a lot.

. We have 3 IP's returning 5%.
. plus a PPOR with $500K ish equity
. Our strategy is to continue buy and hold for growth, buying 25% above the bottom of the market, in largely owner occupier areas in SEQ (and maybe Sydney later)

Serviceability is our killer, but we have good equity as all property was bought pre-'growth spurt'.

So we have the issue of what to do while treading water till we can scrape together enough deposit for the next one, at the same time as convincing a bank they need to lend us some more. We need any investments to be reasonably liquid in case we see a 'bargain'.

In our scenario, I still can't find any feasible alternatives to NI. We're giving Colonial and Platinum a go, but I'm no more or less comfortable with them than I am with NI.

If I was looking at the whole thing longer term, I don't think I'd be using NI as a long term investment option. Basically I like it because I can deploy spare funds into easily so they can do some work, then I can have them back with minimal penalty, and the income addresses my serviceability issues.

NI has been great, but I don't expect it to work as well as good property close-in SEQ with good land content

So if I was Angelina Jolie, Navra Invest is my Billy-Bob Thornton, and great growth property is my Brad Pitt. ie. I'll have a good time with Billy Bob while its on offer, but I only really have eyes for Brad ;-)

PS I'm straight, honest (not that there's anything wrong with not being ... )

 

View attachment 272

It would appear that GSJ has been on about the difference in tax treatment of Growth versus Income without directly spelling it out (or I certainly haven't seen it in any of the post)

This spread sheet was put together DavidMc from somersoft

Somersoft Property Investment Forums - View Single Post - Re-assessing Strategy

which GSJ was refered to in this post

Alternative to Offset Accounts??? - Page 2 - Somersoft Property Investment Forums

I have modified it slightly to reflect more my situation as I only need to consider 30% tax due to structuring. Similarly I would not be able to access the 50% cgt discount without major restructuring and then having to pay 48% tax rather than the 30% imputation we currently do.

From the spreadsheet based on the tax savings 50% CGT discount and on the pure figures then you are better in a pure growth situation.

AS has been discussed extensively if you then take into account the RE that allows the investment (and its associated capital gain), for some the ability to service more debt on other assets, the SANF etc you get a much more complex picture then the one that GSJ continually want to come back to.

I am still to examine iiinvestors figures as whilst reviewing my angle obviously the thread has moved on.

Cheers

 

It wasn't in my posts, as it was not really what I was on about. I don't quite follow your post, but yes, the thread has moved on.

GSJ

 

No offense taken. Let's see where the thread goes from here with iiinvestor's example.

ADD: And this is what I look like.

GSJ

 

If you check the second post it was started by you regarding the use of offsets.

You do seem to like avoiding anything that actually spells out where you are actually coming from and simply want to concentrate on your biases.

Within the context of the spread sheet the capital growth only scenario actually comes out trumps because of the tax advantage to the 50% cgt discount. If you were able to work a consistent CG which then compounds then you are going to be way ahead over time. Unfortunately finding the cash flow to then finance the investment becomes a problem in itself. In addition to the servicability issues of a high growth low yield investment those investments may alos increase the levels of risk and thus affext the SANF's.

GSJ, you may just have to compound your situation to arrive at a structure and investment vehicle that can work for you. You will find that todays solution will not necessarily be the answer to tomorrows problem as has already been discussed by iii in his figures.

Cheers

 

I'm with Gad

After 2 red wines I'm not sure if its making more or less sense and I'm not sure I'd like to be left alone with try Hard

actually its been an enjoyable read and learning experience; thanks to those that have contributed