Managed Funds Leverage into Navra fund?

Excellent post, Steve Navra.

What im thinking of doing, is buying units 50/50 using half IP equity half margin loan. Since both are deductible, and I dont have any non-deductable debt, I doubt its worth capitalising unless someone can show me otherwise?

Do all of the above mentioned lenders allow it?

Thanks alot

 

Maybe I have confused Steve with my question above ?

or he really must be flat out busy !

 

Yes all correct . . . isn't it wonderful

However: Please note that the distribution income is taxable, so you will need structure (losses) to offset the tax liability. Prepaying interest on your margin loan goes a long way toward solving this problem.

Regards,
Steve

 

Great thread guys and thanks for the article Sim.

Aka Dave above, what's the best strategy in regard to paying the interest if you don't have any non-deductible debt?

My situation may be different but Steve said a couple of weeks ago in a brief look at my situation, that I shouldn't pay the interest, just let it capitalize.
Then above Steve says "Prepaying interest on your margin loan goes a long way toward solving this problem" and as tax will be another issue, I'm just a little confused.
What is the point of allowing it to capitalize. Shouldn't it be paid so it can be claimed upon in that financial year or should you just pay a sizeable amount in a good year (of returns)?

PS: I don't actually have a margin loan as yet but am trying to learn all I can in the meantime. Taking out a margin loan against my Navra units would appear to be a major step in the plan to be put together by Navra.
Though I am presuming all the tax strategies ect will be included in the plan. Probably just getting ahead of myself here.

Thanks

 

I have had an account with LE since about 1997. Always been very happy with their service.

I believe it is strictly an asset lend. I don't recall having to provide any proof of income etc. But when you do apply for a normal property loan you are required to put down the LE account as a liability.

Interesting reading - thanks folks.

Cheers,

Simon

 

interesting comparison- I am feeling totally bambozzled by such sophisticated financial advice as well as amazed by the possibliities and need to keep reading- but my main concern is - how do I minimise the tax? surely the only way is to prepay the interest.

 

Leveraged into Navra fund

As per Steve's example in his post of 6 August re cashflow reinvesting. One month further on fund has dropped quite a bit further than the distribution amount. Therefore instead of value of your investment increasing to $315K and capitalising your $150K loan to $162K with an LVR of 51.43% we now have the following:

Your investment is now worth $272K/$162K capitalised interest therefore LVR now up to 59.5%. This is if you did not reinvest and purchase additional units after the distribution. If you had bought additional units it would probably have been at $1.11/$1.12 level so you would still be down, albeit DCA'ed your entry level. If the same figures were repeated for the next month you would be reaching your margin call pretty quickly.

I have forgotten the formula but somewhere investing says if you sit on a 10% loss you have to trade back up 15-20% to get back to where you were. I know someone will know the correct numbers.

The question is how long can you continue to capitalise interest if your initial investment has not been realised? You receive income which is taxed, but how much would you need to keep putting back in to get to where you started if the fund returned a fairly neutral period?

 

If you lose 10% you need to make 11.11% to get back to where you started.

andy

 

I'm in the process of applying for a margin loan with BT-Online. If you are borrowing as a trustee there's an additional fee and the requirement to get a 'Solicitor's Trust Opinion' written by a solicitor (I've been quoted $550 for this). Has anyone else had to do this?
BT Forms (scroll down to page 5 of 24)

 

Yes. If you got your trust from a solicitor perhaps you can ask for a discount as they should know their own deed.

Cheers
N.

 

No I did not have to do this !!!
I used my Hybrid Trust to Margin Loan with BT.
No extra costs such as that came up.

 

Hi Nigel, I have two hybrid trusts, one from NickM and one from DaleGG (identical trust deeds) so unfortunately that idea doesn't apply.

 

How did you get around it, Perky? Perhaps this is a new requirement.

 

Thye never asked for it - this was some 10 months ago.

 

I had that requirement with Leveraged Equities - one option was for their solicitor to review it. It cost $250 or so. Seemed the easiest option for me.

 

HDT and LE

My Navra wholesale fund shares are in a HDT structure. Prior to obtaining a margin loan with LE I was informed by them that there is no power of attorney/delegation certificate or clause (what the!!) within the trust structure. Nick fixed it

Bob

 

Yep me too Bob, identical.

 

So LE seems to be the favoured margin lender on this forum. I was going with BT for the .15% Westpac and .1% NavraInvest discounts.

What is the current LE interest rate and have any of you negotiated discounts? If so I might try LE instead because I asked BT to contact me two days ago and I'm still waiting for a reply.