Managed Funds Navra unit prices

Discussion in 'Shares & Funds' started by pthm, 15th Jun, 2006.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    Was that question for me ?

    If so - no, no PPOR debt ... in fact, no personal debt at all (all investments in trust).

    I do refinance my IP loans every couple of years though to draw out extra equity, which I use for other investments.
     
    Simon Hampel, 16th Jun, 2006
    #21
  2. Nigel Ward

    Nigel Ward Well-Known Member

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    Every couple of years? It's an annual event for me :D :p
     
    Nigel Ward, 16th Jun, 2006
    #22
  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    I'm not that organised :p
     
    Simon Hampel, 16th Jun, 2006
    #23
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    No, you are correct gazza ... but the actual difference it makes (compared to paying off part of the loan with cash, not with distributions) depends on the LVR we are working from and the amount of the payment.

    The higher the LVR and the smaller the payment amount (as a percentage of the outstanding loan), the less difference it makes to the LVR.

    Indeed (using an "edge case"), at 100% LVR, paying off 100% of your loan from distributions makes zero change to your LVR, while paying it off from cash wipes out your LVR altogether - a contrived example, but edge cases are useful to prove points.

    Of course, we don't typically deal with 100% LVRs ... so you are correct in that at a lower LVR, there will be SOME change in LVR as a result of paying down some of the debt using distributions ... but it's usually not that much.

    So I should have said "little" rather than "no" change.
     
    Simon Hampel, 16th Jun, 2006
    #24
  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    Unless you are starting with a very low LVR, I really don't like what capitalising interest does to your returns.

    I intend to live of the "returns" from my investments ... I don't differentiate between distributions (income) and growth ... I'll use both. I don't anticipate the interest will be enough to cover costs and to provide the income I need ... so I'll augment that with growth returns.

    Yes, this means I might be in effect capitalising interest - but only as required ... my preference is to have income cover those costs if possible.

    But it's all just names anyway.

    Here's the formula:

    A percentage of (Income + Growth) spent on (Interest + Living Expenses), with the rest being reinvested or used to reduce debt.

    So it's not quite as simple as "capitalising interest" and "living off distributions".
     
    Simon Hampel, 16th Jun, 2006
    #25
  6. TwoDogs

    TwoDogs Well-Known Member

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    Yes, thanks. You've done well.

    I mentioned only to describe the methods I use. I still have big PPOR debt so I do capitalise interest on ML and pay distributions to me. Then I have more cash to reduce PPOR debt. While keeping those LVRs under a constant watch of course.
     
    TwoDogs, 16th Jun, 2006
    #26
  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    Ahh ... debt recycling ... nothing wrong with that.
     
    Simon Hampel, 16th Jun, 2006
    #27
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