Case Studies
To illustrate how Navra Financial Services has used structure for clients financial prosperity in the past, here are some example case studies. Obviously, the specific details vary from client to client depending upon their individual desires and situation and other criteria such as age, assets, risk tolerance, market and financial conditions.
Case 1. Investment Structure : A Balanced Portfolio
We need to start with a realistic goal such as the acquisition of safe and conservative assets i.e. shares or residential property. This in turn will put the person solidly on the fast track to financial independence.
One of Navra's incredibly successful low risk investment structure strategies is a carefully balanced portfolio of property, cash-flow and shares.
With this structure each dollar invested in property should be matched with a dollar invested in shares. The big difference with this tested method of investment optimization is the amount of leverage utilized -
For example:If property is purchased with an 80% loan. Shares could be purchased with a 50% loan.
Susan is finally enjoying her retirement. Her husband has sadly passed away leaving her the family home but she is certain she wants to create a more comfortable lifestyle for her retirement years -
Susan's financial situation looks exactly like this -
She has -- $550 000 home owned outright (unencumbered) that she lives in.
- $30 000 cash. The remains from what was once $130 000 and was left by her late hubby when he passed on.
- $12000 a year income from her fortnightly pension.
On the basis of Susan's current portfolio an 80% loan (or $440 000) against the value of her home was acquired from the banks. The cost of the loan being 7.5% or $33 000 per year. This total loan amount of $440 000, we invested into a portfolio of shares with another 50% loan. Thus Susan now has $880 000 of shares with a $440 000 loan.
Modestly figuring a 10% income return on the share portfolio gives an income of $88 000 per year. NavraInvest has consistently returned over 15% for investors over the past 10 years.
The cost of the loan against the shares ($39 600) is capitalized against the growth of the portfolio at 5% or $44 000.
Net cash-flow:Income of $88 000 less the cost of the property loan of $33 000 comes to a healthy $53 000 per year.
Tax implications:The income tax from a share portfolio is taxable but the wonderful Federal Government offers significant tax deductible offsets including the cost of interest of the loans. In this example, that's $33 000 per year for the property loan plus $44 000 per year for the share loan. That's a total tax deductible offset of $77 000 against an income of $88 000.
Wow! There is no trick to this. That's a net taxable income of $88 000 less tax at the top tax margin $5 335, which equals a yearly income from shares at a modest 10% appreciation of $82 665.
With this new amount of gross income, Susan becomes very very happy indeed!
However, the income was more then double her cash flow requirements, so it was decided to lower the income to $32 000 per year and use the excess yearly income to acquire a further two investment properties with an 80% loan ratio each.
The same original portfolio now looks like this -
$1.55 million worth of property.
Lifestyle at $32 000 per year
... and a share portfolio of $440 000.
The clients Loan to Value Ratio is now 63.19%
9 Years from now:For Susan, following the same basic investment strategy method for a further nine years shows where the real substantial rewards are made -
Now the property portfolio has grown to $3 500 000.
Extra value has been drawn down at 60% of its total income and invested into the share portfolio.
The share portfolio has increased massively to $2 240 000 with now produces $224 000 per year at our modest original share profit estimate of 10% yearly income return.
The net amount of taxable income has now increased from $32 000 per year to $150 000 per year.
And the current loan to value ratio becomes: 21.60%
Susan is now looking very comfortable indeed in her retirement.
In less than 10 years, Susan has more than doubled the value of her property portfolio. She now owns a country coastal home. She has quadrupled her income from her share portfolio. Meeting her dreams of traveling to parts of the world she hasn't been to, has been a bonanza in retirement and leaving a substantial financial legacy to her grand kids is now a very real reality.
Susan has started a very healthy financial estate. She can now focus more comfortably on other things that matter in her life without any financial burden. The same financial comfort is possible for you too!