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Where are you at, and where do you want to go?

Discussion in 'Investing Strategies' started by AndrewG, 11th Feb, 2007.

  1. AndrewG

    AndrewG Well-Known Member

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    I hope this thread brings in some good discussions.

    Where am I at, and where do I want to go? This is my brief story.

    Where am I at?
    I am 35, married, and with our first child on the way (11 weeks roughly to go!). I have been interested in investing for a number of years now, and got into property in 2001. Since then, I have built a property portfolio of 7 IPs, and our own PPOR. They are a mix of 2br Units, and 3br Houses in Adelaide and Brisbane metro areas. Total estimated value is around $1.5M, and total loans are around the $750K mark - so a nice healthy LVR of around the 50% mark. The entire portfolio costs me around $600/month to maintain the LOC, so this is my personal committment to my property investment portfolio. I am currently in between jobs, living off previous savings, and will be enlisted into the Air Force in June.

    As I mentioned in a previous thread, I have been 100% focussed on my passion of investing in real estate, both in theory (learning) and in practice (buying the IPs I now own). I have been so focussed on real estate, I have neglected to even consider how managed funds could also assist me on my journey of being financially independant. I guess it is easy to feel comfortable repeating what you already know (buying houses etc.) but uncomfortable in starting something new (investing into managed funds).

    Where do I want to go?
    As I mentioned above, my property portfolio is costing me around $600/month - and that is because I have not used any of my personal money to buy any of the IPs. I get 80% LVR loans directly against each property, and the other 20% plus purchase costs come out of my LOC. While it is only a small committment, and one that is easily manageable on even a small salary, I would however like to eliminate this contribution. Thus, I am here on InvestED learning about Managed Funds. My initial goal, is to invest sufficient money into one or more Managed Funds, to achieve an income that firstly covers any debt associated with the investment, but then also to profit at least $600/month to cover my real estate committment.

    At this stage, I am seriously looking at investing some money into the NavraInvest, as well as CFS Property Fund. I have done a fairly simple calculation as follows;

    Invested Amount......... $120,000
    Assumed Return.......... 15%
    Loan Interest Rate...... 9%
    Interest Per Month...... $900
    Return Per Month........ $1,500
    Profit Per Month...........$600
    Profit Per Year.............$7,200

    As can be seen, based on a 15% overall return, I would need to invest $120,000 to be able to profit $600/month to achieve my initial goal. Of course I understand that a 15% return cannot be guaranteed, and yes I understand the market rises and falls randomly. Having looked at those two funds, I am confident that over time (yes I have checked the 3month, 1yr, 3yr return specs etc.) this should be achieveable.

    Once this is achieved, and my property portfolio is neutrally geared overall, I would then like to move on to actually making some serious money from managed funds.

    I would be interested to get feedback from people with regards to those two funds in question, and whether or not you feel these are appropriate choices - perhaps you have a better idea, please let me know.

    Well there you go, thats my little store. Feel free to ask whatever questions you want, and nitpick if needbe. If I've gotten something wrong with my figures or you think they're just not going to work, feel free to let me know :)

    I would be most interested to hear from people who have comments/suggestions with my goals and strategies. I would also hope this thread sparks others to post their own "where are you at, and where do you want to go" stories for others to also comment on and provide assistance. C'mon folks, lets get into this as I'm sure we can all assist one another in some manner.

    Andrew.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think your basic strategy is pretty sound - and I also think that the Navra AUS and CFS Property Securities funds are pretty good choices (I have large amounts invested in the wholesale versions of both). They both pay good quarterly income - and have both been performing quite well over the last 3+ years.

    Some words of caution:

    1. While I think 15% is quite achievable for Navra, I think it may be slightly optimistic for a long term (10+ years) view due to the inevitable lengthy market downturns that will happen eventually. I suspect the long term average return will be slightly lower than 15% - but still well above 10%. So long as you aren't cutting it too fine by assuming 15%, and you are making the most of any period where you are getting at least 15%, then I think it will be okay.

    2. One word of caution with the Property Securities fund (and indeed any fund investing in listed property) ... there are some commentators I've read who are suggesting that the stellar run that listed property has had over the last 3 years or so sees that market segment overvalued - and indeed with the extra risk that many LPTs are now taking on to improve their headline returns (higher internal leverage, more international property), they are not necessarily as safe as they once were. Of course, that being said I still have a large exposure to them - but I'm keeping a close eye on that market with plans to move out if there is evidence that their run is over (while busily "making hay while the sun is shining" in the meantime !!).
     
  3. coopranos

    coopranos Well-Known Member

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    Gday mate
    Similar to yourself, I too have spent a huge amount of time reading and researching the property market completely neglecting the idea that any other markets could help me achieve my goals more comfortably and quickly.
    Introducing higher yielding managed funds into the equation really seems to be a valid way to have your cake and eat it too, although obviously it comes with a few costs - the higher volatility and new research required being the major ones.
    You have spent a few years building quite a good portfolio, and you are to be commended for that! I would think that with your equity, there are plenty of options for you to look at.
    Eg. You have plenty of room to take out $200k as a line of credit against your existing portfolio, probably without hurting your ability to purchase more properties should you find some that meet your criteria. You could then get a margin loan of say another $200k, taking your total portfolio in managed funds to $400k. This would give you a lot more room to cover your $600 p/m should the yield drop a little, and if you do hit your target yield that is more money each month to either reinvest, or pay off your PPOR, or something else.
    One thing I would suggest is having a read of Van Tharp's book Trade Your Way to Financial Freedom. Although written with traders in mind, it does have some very good ideas with regards to implementing money management and exit strategies to reduce the risk of getting stuck with dogs in your portfolio.
    It is a good read, well worth your time!
    Congratulations on being in a position where you have a lot of options, as that is what we start investing in the first place for!!
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    coopranos makes a good point - I would tend to aim a bit higher than just covering the $600pm - to give you a better buffer for those period when your portfolio doesn't perform as well. Just don't spend the surplus funds - park it in your margin loan to minimise interest and give you a bigger buffer (or re-invest it for a greater compounding effect).

    Remember that with the extra leverage - if you end up having a year where both the funds you have invested in show negative returns with quite small distributions - you may find yourself needing to fund not only your property interest shortfall, but also the margin loan interest out of your own pocket (depending on how much of a buffer you have in your margin loan and whether you are capitalising or not). Make sure you have taken those possibilities into account with your planning - negative years do happen - they are not the end of the world, you just need to have a plan for dealing with them (having cash available somewhere is a good start).
     
  5. AndrewG

    AndrewG Well-Known Member

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    Sim,

    That is pleasing to hear. The NavraInvest fund seems to be popular from an income point of view, and the property fund seems to have had very good growth for 3+ years now (no guarantee of the future, as you pointed out tho).

    15% is what I believed to be a fairly "reasonable" figure to expect. If it is more, or less, then it simply means I may have to invest more/less to be able to achieve my short term goal.

    Thanks for the information. How often do you keep tabs on your investments, and what resources do you use for doing so?

    Andrew.
     
    Last edited by a moderator: 12th Feb, 2007
  6. AndrewG

    AndrewG Well-Known Member

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    Yes it seems so easy to do doesn't it, chugging or steaming your way through one particular avenue - especially when a boom is rewarding you every step of the way. Even though R/E is quite 'flat' at the moment, I still enjoy the concept of it all and am not nervous in the slight bit. I guess it would be different if my LVR was quite high.

    Yes I shall certainly be looking into borrowing more once I am working again. At the moment, while not working, I doubt anyone will look at me unless I'm prepared to match the borrowing amount with cash. i.e. at the moment I'll look to invest $20K with a margin loan of $20K so its small, but will get me going.

    Andrew.
     
    Last edited by a moderator: 12th Feb, 2007
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Daily ... I'm an addict - what else can I say ! :eek:

    I update unit prices and check on the progress daily - but this is mostly because I am actively building my portfolio at the moment. Once I reach my targets and am no longer actively adding new funds, I will sit back and just let it go. I'll have to try hard not to watch it every day !! Maybe I just need a holiday :D

    I have a huge, complex spreadsheet which I use to track the entire portfolio with - along with some computer programs I've written to generate a "score" for how well each fund is performing based on a complex set of criteria.

    Unfortunately, my spreadsheet is not something that is easily shared - it's simply too complex and it would take weeks to write the instructions on how to use it. However, I am thinking about building a website that can be used to track an entire portfolio with daily price updates and charting, and can also calculate capital gains/losses for when you sell (I have another complex spreadsheet to do that!). Right now it's a major pain to add a new fund to my spreadsheet, I'm hoping that a portfolio management program will make it far easier.
     
  8. Jacque

    Jacque Team InvestEd

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    Ok, in keeping with the spirit of the original purpose of the thread, I'll have a go :)

    WHERE I'M AT

    Life is good. I'm eternally grateful every day for my good health, my family, my friends, my life overall. Luckily I'm also an optimist by nature :)

    As far as investing goes.... my husband and I have, from the time we met, been fortunate enough to possess an investors mindset. We bought our first IP back in 1990, two years after we married, and have always looked towards the future as being financially independent, once we give up our day jobs :D
    Over the last 17 yrs, we've been active investors, in both asset classes (property and shares) and are very happy with our current portfolio. We own several properties across two states at the moment, including our PPOR and are about to upgrade our current Sydney PPOR, in part thanks to our investing profits over the years.
    Shares and funds also make up part of our portfolio- though probably not as much as they should. I've always been the driver of property investment and find it so much more interesting than shares overall :) - though it can be damn frustrating at times- depending on the tenant and PM in question.

    WHERE DO I WANT TO GO?

    The answer to this depends on which day you ask me :D
    Seriously, however, with three active children, a business, a home to run and friends to keep up with some days I'd prefer to go NOW rather than later!
    The ultimate dream is absolute financial independence in 6-7 years. This doesn't mean that hubby and I are going to quit work and move into the penthouse waterfront apartment on the Northern Beaches (love this part of Sydney!) However, what it means is the choice to be able to do just this. By this time, we anticipate our investments running so well as to provide us with an income that we are comfortable living on for the remainder of our days :D

    In the meantime, however, the journey is the fun part and though we are working hard to ensure that our future is sunny, we also take time to enjoy where we're at now and smell the roses :)
     
  9. Nigel Ward

    Nigel Ward Team InvestEd

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    17 years! I can hardly believe that :D you must have started early. ;)

    Seriously though, what do you think are the key lessons you've learned over nearly two decades of investing?

    N.
     
  10. iiinvestor

    iiinvestor Well-Known Member

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    Have you checked out Stex? The screenshots seem to show a comprehensive system. I only bumped in to it on the Paritech website the other day. Anyway, worth a look.
     
  11. Jacque

    Jacque Team InvestEd

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    Well, I was still in primary school :D ;)
    And I must clarify that for the middle period of some of those 17 years, investing took a back seat to children and other distractions ;)

    Key lessons I feel as though I've learnt would include:

    1. Research and research again before you jump straight in. Asking loads of questions of the right people is the key to understanding what it is you're investing in and how that particular asset class works.

    2. Don't let investments become an obsession and all you talk about. They should figure into part of your overall plan, but not be the sole focus of that plan. Don't get me wrong- I love chatting to people about property (shares aren't my cup of tea- I leave that to my better half!) but other interests are healthy :)

    3. Don't take advice from people who haven't been there before, heard it from a "friend" or who have no investments of their own. Enough said.

    4. Build up a network of contacts and professionals whom you can trust and seek counsel from. These are perhaps the most valuable resources (people) and you will learn more from them than any book.

    5. Try to avoid taking children with you to open homes :D

    Now that I've started the ball rolling, how about you, Nigel?
     
  12. Glebe

    Glebe Well-Known Member

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    Where am I at?

    Aged 29, married, no kids. Net worth about $500k.

    $50k was from a redundancy, $50k was the capital gain from a sale of a former PPOR, $200k from savings and $200k from unrealised gains in the sharemarket.

    Have recently bought an IP in Balmain, highly leveraged. It'll be a big cash drain over the next couple of years but we think we bought it under market value, we've already performed a small reno which has added value. In a few years time it'll be our PPOR. Dream location (for us).

    Where to from here?

    Our goal is retirement at the age of 40. This will require our wealth to double every five years - so $1m at 35 and $2m at 40. Tough but achievable, in fact I think it represents a 22% compounding target so we'll need leverage and bulls. Lots of them. This should give us enough income via LOE.

    I'm the financial controller of the household, and I'm an equities sort of person more than houses. I don't think we'll buy any more IP's - I'm not turned on by their management, their repairs, their transaction costs etc.

    From here on in, after I pay down my loans a little to a more comfortable LVR I'll push into LIC's when I find them below net tangible asset value. Currently we have managed funds worth over $1m on a 58% LVR, this will push to $3m+ in the years ahead :)

    Can't wait :)
     
  13. quoll

    quoll Member

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    where are we?

    where are we?

    In the sh!! but geting out.

    Property is tracking at about 10% gain per year, business's aren't doing much. about $3m in assets and $2m in debt. Income between -$50k and +$300k currently about +$0 living off the credit cards. Which sucks.

    :mad: People need to buy more stuff. Get the retail spend up.

    Learning about development. You need to keep learning.

    Just keep buying property and building the foundation, things will work out fine in the long run.

    cheers
    quoll
     
  14. AndrewG

    AndrewG Well-Known Member

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    G'day Glebe,
    Would you mind sharing what funds you are currently investing in??

    Andrew.
     
  15. Glebe

    Glebe Well-Known Member

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    No probs..

    Navrainvest Wholesale Australian Fund
    Platinum International
    Tyndall Australian Share Portfolio
    UBS Property Securities Fund
    Vanguard Index Hedged International Share Fund
    Vanguard Index Property Securities Fund

    and superannuation with Hunter Hall.

    Just because I hold them doesn't mean I recommend them. Having said that, I have no major complaints.
     
  16. AndrewG

    AndrewG Well-Known Member

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    At age 29, thats really impressive - well done indeed!!! You have a massive portfolio of managed funds, do you own any property at all? (maybe I missed that bit?) How are you intending to go forward in terms of your investing vehicle, property, mf, combination etc.?

    Andrew.
     
  17. Redwing

    Redwing Well-Known Member

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    Who Me..?

    Great Thread...and gives an insight into some of the people on the Forum, a few I've conversed with are around the same stage as we are (many are where we want to be ;) )


    Where have we been?

    I've had an interest in property since around 1992 when I read Noel WHITTAKERS books ( a great read by the way), which then led me to Jan SOMMERS. I then purchased an IP in WA for around $69,500.00 (must be worth around the $300k mark now).

    After reading "The Richest Man in Babylon" I decided to apply the 10% savings rule (as well as holding the IP) and put 10% of my wage away; At the time I was earning reasonable money (to me..around $65k for 7-8 months work). Every time I reached $1,000.00 I'd invest into shares via a broker (from memory BHP, Fosters, GIO when they listed and a few more). I later sold the shares at a profit to purchase a block of land in Broome from DOLA which I later sold to Homeswest 3 months later for around $15,000.00 profit (split between myself and my partner).

    **NOTE** I bought this duplex block for around $42k it would now be worth around $350k+ :(

    We later moved to Perth and purchased a block of land with the intent to build (Rockingham and later sold for a slight gain in a flat market, again this would be worth a packet now) as well as a Apartment in Perth (South Perth...again old to purchase a house). I eventually split from my partner (though have a good relationship and an 8 yr old son whom I see regularly).

    Shares have been bought and sold over the years and I've even learnt a few thing such as setting triggers such as stop-loses and profit-stops

    Still Amazed at Zinifex which I sold at $3.60 :(

    Still Happy I sold Sons Of Gwalia at its peak :)

    I've been *down* to a stage of earning nearly $20k for a year and sleeping on a blow up matress in a work mates spare room and *up* to what I have now

    Where are we at?

    Happily married for three years, two children with a third on the way (8yrs, 2 1/2 yrs and a bump in the belly).

    Four IP's in Perth at a value of approx $1.4M and loans of $640k (one in a HDT), shortly will add to that with an eastern states IP (to be acquired in the HDT)

    Still learning about Finance, Lines of Credit (which we now have) etc and realising many mistakes could have been avoided as we sold assets when we probably didn't have to, knowing what we now know (You dont always have to sell A to buy B, sometimes you can arrange it so that you have A & B..what a revelation, lucky I now hang around on Forums with people smarter than I);) .

    No direct sharesheld at the moment, however the account has been set up again (through the HDT)

    Managed Funds held in a HDT and we will soon be looking at gearing further into this as well as look at other Funds for balance and growth.

    Where do we want to go?

    As outlined above....another IP in the next few weeks, Adding to the Managed Fund Portfolio as well as exploring some Direct Share Investments, as well as a new car which is well and truly needed.

    Luckily, I enjoy my work so there's no dramas there and its pretty flexible (most of the guys are property investors though a bit gun shy about shares).

    Financial Independance, Living Of Equity....ALL sounds great to me !

    AND as always, we're still learning...thanks to everyone
     
  18. gad

    gad Well-Known Member

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    In a bid to keep the thread going, as I enjoy reading about other's journey's & dreams, I'll add our's.....

    Where we are now:

    My wife & I are now approaching 51, married almost 32 yrs (living together for almost 34 yrs). I earn app. $50k p.a. & my wife earns app. 10k p.a. in wages.

    Just over eight years ago we were living in State Housing, apart from a couple of old bom cars, all we had was about $30K of shares & app. $5k cash.
    Our two daughters had left home but we had a daughter's friend living with us (having a real bad time at home with her drunken mother) as well as my youngest brother who had just gone through a marriage breakup.

    This is how it looks just over eight years later. (Disregarding Super)

    Total Debts:

    PPOR: $271,660
    IP#1: $139,690
    IP#2: $165,741.75
    Margin Loan: $471,680.75 (45.93% LVR)
    Credit Card: $229.40
    -------------------------------
    $1,049,001.90

    Assets:

    Navra Funds: $1,034,692.87
    Offset Account: $43,039.92
    Shares: $27,179.45 ($25k Navra - not listed)
    -------------------------------
    $1,104,912.24

    Which, put another way, would mean we could own our PPOR & both IP's out right, with no debt & have almost $56k odd over.
    IMHO, not a bad result in just eight years. I'm quiet proud of how far we have come in that time, especially having had to battle my wife to agree to any investing, though she now just leaves it all in my hands :eek:)

    Where we are going!

    I'm going to move a lot of the funds out of Navra, an income fund, & pump it into a good growth fund.
    I will leave enough in the income fund to cover costs of the next IP, which we will probably buy between Apr. & mid this year.
    Now, being over 50 I'll also be looking at Super to try & pump it up, salary sacrafice, tax benefits ect.

    The journey continues.

    Good health & prosperity to you all.
     
  19. AndrewG

    AndrewG Well-Known Member

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    Good on ya :)

    Wow, $1M in Navra is impressive!! What is your reasoning for moving from Navra to growth funds, change of direction or lack of performance etc. ??

    Andrew.
     
  20. gad

    gad Well-Known Member

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    G'day AndrewG

    Thus far I have not needed the income from the Navra funds & have always reinvested the distributions.
    It appears to me that growth funds are a better option with superior returns & better tax advantages.
    I have not as yet looked into this but it is something I will be looking into in the near future.