Portfolio 2008

Just put together and updated our portfolio for 1 Jan 2008.
You may notice a big drop in the number of IP's and a rather large shareportfolio has been added.

Thank you VERY VERY much for sharing, Brenda.

Would net cashflow on this whole portfolio be around 70-80k?
Alex

It was a hard year for shares. Everything was volatile.

Thanks for sharing Brenda, nice thought, and congratulations on your progess.

Just a couple of comments (sorry, I can't resist! ):

- The currently tenanted residential properties show a gross yield based on their present value of 4.35% pa, excluding expenses and maintenance, and repayments on the Morgan property.

- If you included these expenses, the net yield based on the present value of the currently tenanted residential properties would be close to 3% pa.

- So it is essentially a residential investment property portfolio that is very slightly positively geared based on the present value of those properties.

- Probably just enough to live on and not have to work though, which is certainly a good achievement.

- And this is excluding the PPOR and Burrum Heads property (not sure what your plans are with that).

- The share portfolio is very impressive at about 30% of gross assets (presumably some/most initial funds for this came from borrowings against your property portfolio?), with a yield at present value of 8.8% pa, and 8% pa on purchase value, though it appears slightly negatively geared at present and has lost some value.

Hence, what I gather from this is that using residential property as a source of leverage by tapping into the equity built up here and then putting these funds into higher yielding investments, eg. shares, seems a far more effective way of generating a retirement income stream than un-leveraged residential property alone...which was my main point in another recent thread.

In your case of course, you're doing a bit of both at present, which makes perfect sense.

Would you agree Brenda?

Others?

Let me know if my numbers don't make sense.

I could at anytime increase my loc substantially and have plenty to play with.
I just haven't made up my mind exactly what I would want it for.

The good part about shares of course is there aren't any unexpected expenses, unlike rental IPs, and the share companys do not ring you up to tell you 2 hotplates aren't working on the stove and should someone be organised to fix it. You just never seem to have any carefree holidays when you have a ton of IPs even if they are managed.

I never "expect" income yield to surpass capital growth. Some of my properties did earn say $5k to $10k net last year in income, however their values rose between $25k and $100k.
Could the capital growth stall for years? Yes.
Could inflation send rents up and increase yield? Yes.
Could interest rates rise further? Yes. Could they drop? Yes.
Working out things on pure averages is a dangerous game which is why I have diversified my investments and kept some powder dry for the unexpected.

Brenda just curious as to why your share portfolio has decreased by almost 9%. Or have you entered the figures in the wrong way. The only reason I ask is that the ASX 200 performed at just over 11% last year. Did you make some bad investments ? Maybe you purchased heavily in BHP. I have an investment philosophy which my parents instilled in me 20 years ago. It was find 10 household items that people use everyday and invest in those companies. Of course those ten things change over time but I haven't found a family that purchases coal so I don't buy resource stocks. Yes it means I have missed out on some spectacular gains but over the longer term have found it to be a solid philosophy.

Brenda,

Just wondering why your loan balance for the shares is higher than the cost. Are you capitalising the interest?

Cheers,
GP

Brenda Irwin said:

The good part about shares of course is there aren't any unexpected expenses, unlike rental IPs, and the share companys do not ring you up to tell you 2 hotplates aren't working on the stove and should someone be organised to fix it. You just never seem to have any holidays when you have a ton of IPs even if they are managed.

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Hi Brenda.

I see you've still got quite a few properties in your portfolio.

Are there any plans to sell down even more IP's (and invest more into shares or another area).

Thanks for the update too. Great to see what is possible.

Regards
Marty

Sell more IP's, only if they become a severe pain in the pocket.

Share loan would be more than the purchase price of shares because of brokerage costs.

Share price is down on what we paid for it. Yes atm, but it fluctuates very wildly. Not for the faint hearted when your value can drop by $100k in one week and rise by just as much the next week.

Sharemarket is very volatile at present. Didn't we just have something like 7 straight drop days? It can rise, drop or even go sideways but sooner or later it will sort itself out and get onto steady shareprice growth.
Hopefully the yields will increase over time.

Companies invested in are: AGK, CWT, FXI, MLT, NHC, PPT, SHV, SOL & ZFX.
CWT & SHV have been affected by tax amendments and drought. No idea what ZFX problem is but I am reaping a very nice dividend income.

Come to think of it how come SHV shareprice is down? I still have to pay $11 for 500g of almonds where I live. Maybe the supermarket is making all the profit?

coastymike said:

Did you make some bad investments [ie. stock selections]?

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I avoid this by using index funds/ETF's, join us here to discuss this :

http://www.invested.com.au/91/

Brenda Irwin said:

The good part about shares of course is there aren't any unexpected expenses, unlike rental IPs, and the share companys do not ring you up to tell you 2 hotplates aren't working on the stove and should someone be organised to fix it. You just never seem to have any carefree holidays when you have a ton of IPs even if they are managed.

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Yes, although I'd argue that the process of monitoring shares and keeping up to date with a company's progress and developments in its industry and the wider market (depending on if you use FA, TA or both) are even more difficult and time consuming (but someone who's been investing in shares for a while might say otherwise)...but I'm very biased here, shares aren't for me, so I wouldn't really know where to start...

JIT said:

monitoring shares ..(is).. even more difficult and time consuming.

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True, it does not fit well with making a living but I enjoy keeping up with what's happening in the world, being semi-retired.

As for profit/loss on shares: I booked over 25% paper profit this calender year and have been doing so for years. With that kind of compounding I have the luxury of not having to gear up on financing. I use borrowed funds of course but I have plenty of free-board and I do not have to find hundreds of $$$ every week for mortgage repayments.

Personally, I love the challenge. Fun and profit, as they say.

Sunfish said:

True, it does not fit well with making a living but I enjoy keeping up with what's happening in the world, being semi-retired.

As for profit/loss on shares: I booked over 25% paper profit this calender year and have been doing so for years. With that kind of compounding I have the luxury of not having to gear up on financing. I use borrowed funds of course but I have plenty of free-board and I do not have to find hundreds of $$$ every week for mortgage repayments.
Personally, I love the challenge. Fun and profit, as they say.

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Should be the focus of another thread Sunfish

PS: Thanks for the Update Brenda..amazing and congratulations to both of you on your achievements; is Les retired yet?

Brenda Irwin said:

You just never seem to have any carefree holidays when you have a ton of IPs even if they are managed.

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That's the 'quality' not 'quantity' argument for you there.

And that McKnight fellow owned scores of positive cash flow properties?!

JIT said:

- The share portfolio is very impressive at about 30% of gross assets (presumably some/most initial funds for this came from borrowings against your property portfolio?), with a yield at present value of 8.8% pa, and 8% pa on purchase value, though it appears slightly negatively geared at present and has lost some value.

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Um...I didn't add franking credits (whatever they are), so it might actually be positive...?

Agreed Brenda. The past week did see a major downturn. Zinifex is a resource stock so something I don't invest in.

I agree that longer term you look for companies that pay a decent dividend yield and let the market sort itself out. I remember when I purchased 10,000 shares in CBA back in 2000 when it was about $25 a share and giving a dividend of about $1.30 a share. The stock has gone all over the place since that time but it now pays a healthy $3.30 a share. So for a $250,000 invest not only do I have some nice capital growth but also a good dividend of about $30K per annum. And fully franked I think shares are like property. Look for the rental yield that the investment brings over time and don't worry too much about the capital growth. On the converse I had another stock CCP which dropped almost 50% in one day. And it never recovered so it got dumped. That hurt but it is part of the market. That investment went against my investment philosophy and I paid for it.

Good luck with it Brenda. I moved all my property into shares about 3 years ago now and sure we have had a bull market in that time and so I could distort figures to show how much better shares where than property but the reality was I also got sick of the council rates, agents, etc etc and decided just paying a brokerage fee was a better course of action. Plus my broker got me into some nice floats this year which performed extremely well (sort of like doing a reno for a quick cash boost).

I agree it is not for the faint hearted as you wake up one morning and realise you are about to loose a couple of hundered thousand dollars (well on paper anyway).

Sunfish the only comment I can make is that longer term returns of 25% will be hard to achieve. Over the past 3 years most investors have achieved those sort of growth rates but I think when the market cools that will be difficult. Warren Buffett once said if you could demonstrated a 25% return per annum for 10 consecutive years then you would have Wall Street fund managers willing to pay you millions of dollars for those returns year on year. Keep it up though. I'm not a trader. Just buy and hold. My only reason to sell is when the dividend is decreased or the stock drops more than 10% and doesn't recover within 2 months.

Funds aren't for me JIT. I like to have my simple philosophy of 10 stocks in items used by most households. These give me a nice dividend stream every year and I'm happy. I certainly haven't done 50% like some of the funds did just before Christmas (i think capital gain was about 22% just after chrissie - but doesnt matter because I'm not selling anyway). The funds are great for some people. For others not. I just wish I could have more in super. But now with debt instalment trust I can

Is my internet slow or are other people having problems posting. I keep having to post twice.

Brenda Irwin said:

Share loan would be more than the purchase price of shares because of brokerage costs.

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$34K on $1.2m? That seems pretty steep to me, although of course I don't know how many times you've bought and sold.

Coasty, the forum has been very slow for me at times for some days now. It's got so frustrating at times that I've just given up and tried again later.

Cheers,
GP

Thank you

I would like to thank you all for your encouragement, and critique.
All is taken on board and digested.
I just like to give everyone another lot of figures to play around with.
When you are solely working on your own figures all of the time its easy to get bored and over analytical (is that a word?).